Fannie Mae conforming loans are also available in a full range of fixed-period Adjustable Rate Mortgage (ARM) products. These start off with a fixed-rate and fixed monthly payments. Later, after the introductory period ends, the interest rate and monthly payment will either rise or fall, based on the terms of the particular loan and the prevailing interest rate index it is tied to.

Consumer Benefits

• The borrower can save money at the beginning of the loan period with a low introductory rate and affordable monthly payments.
• There are many flexible terms and mortgage loan features available to fit the unique financial goals and needs of the borrower.
• Borrowers are able to qualify for higher loan amounts and lower interest rates, compared to those offered with fixed-rate mortgages.
• If prevailing interest rates continue to fall, the borrower’s interest rate and monthly payments may also go lower when they re-adjust.

Interest-Only mortgage programs allow the borrower to make smaller monthly payments during the early years of a fixed-rate loan. This happens because they only pay the interest on the mortgage without paying off any of the principal balance followed by a fully amortizing period. After this initial period the loan returns to a normal amortization schedule. Interest-Only mortgages are only suitable for fully-informed borrowers who understand that after the initial interest-only period their monthly mortgage payments will experience a significance increase. To ensure that the borrower will be able to manage those payments after the increase they will be qualified for the loan based on making payments that include principal, interest, taxes, and insurance ( PITI).

Consumer Benefits

• The borrower enjoys low monthly payments during the interest-only period. This frees up cash to invest or spend in other ways.
• Paying interest only may be helpful, for example, when homeowners have move-in expenses to manage or if they plan to sell the home within a few years instead of keeping it for the lifetime of the loan.
• Homeowners may still have the option to make payments on the principal during the interest-only period, and in that case it will help to reduce future monthly payments without additional fees or penalties.