An adjustable rate mortgages (ARM) is a type of mortgage where you payment can fluctuate depending on the program that you choose. The interest rate is tied to a particular index, most commonly the monthly average of Treasury securities with a constant maturity of one year. For the initial 1, 3, 5, 7, 10, year period, your rate is fixed. Then after the initial fixed period the loan will follow the movement of this index up and down, with certain limits. As a rule the lower the start rate the shorter the time before the loan makes its first adjustment.

Some adjustable rate mortgage programs are: 1 Year Arm, 3 Year Arm, 5 Year Arm, 7 Year Arm and 10 Year Arm. FHA also provides a 1 year arm that is actually a good product since the rate cant move more that 1% per year.

Since adjustable mortgages have a lower introductory rate (teaser rate). They can help borrowers qualify for a larger home and enjoy a lower initial monthly payment.