Adjustable-Rate Mortgage (ARM)

About this program

How it works — step by step

1. 1

   Take the 60-second check-in

   Five questions about your income, how long you expect to hold the property, and your comfort with rate risk. The matcher compares fixed-rate and ARM scenarios so you can see the break-even on the rate difference.

2. 2

   Understand your ARM structure

   An ARM is named for its adjustment schedule — a 7/1 ARM is fixed for 7 years, then adjusts annually. Caps govern how much the rate can change: initial cap (first adjustment), periodic cap (each subsequent adjustment), and lifetime cap (total increase over the loan life).

3. 3

   Licensed MLO models the scenarios

   A Sunrise officer walks you through a stress-test of the ARM at the cap ceiling — confirming your DTI still works if the rate hits its maximum. This is a required disclosure under RESPA; understanding the worst case is how you make the right decision.

4. 4

   Underwriting at the qualified rate

   Conventional ARMs qualify at the higher of the start rate + 2% or the fully-indexed rate under ATR/QM rules. Non-QM ARMs have different qualification standards. Your income must support the worst-case payment, not just the initial rate.

5. 5

   Close and fund

   ARM loans close on the same timeline as fixed-rate — 21–45 days. The rate is locked at the start rate for the fixed period. Adjustment notifications are sent by the servicer before each rate change date.

What it usually looks like

• Same documentation as fixed-rate conventional (W-2 or two years of tax returns for self-employed)
• Income must qualify at the stress-tested payment (start rate + 2% or fully-indexed rate)
• Credit score 620+ (conventional conforming ARMs); higher for jumbo ARMs
• Available for primary, second home, and investment properties (program-dependent)
• ARM structure (5/1, 7/1, 10/1) determines the fixed and adjustment periods
• Rate caps limit adjustment: typically 2% initial / 2% periodic / 5–6% lifetime

How it compares

Program terms, LTV limits, and documentation requirements vary by lender. As of June 2026. Not a commitment to lend.

Real scenarios

Who this fits

• Mortgage for a Startup Founder

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• Mortgage for an Established SMB Owner

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• Mortgage for a Dual-Income Household

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Common questions

What is an adjustable-rate mortgage (ARM)?

A mortgage with a fixed interest rate for an initial period (typically 5, 7, or 10 years), then annual adjustments based on a benchmark index (like SOFR) plus a lender margin. Common structures: 5/1 ARM, 7/1 ARM, 10/1 ARM.

How do ARM rate caps work?

Caps limit how much your rate can change. A typical cap structure is 2/2/5: the initial adjustment can be +2%, each subsequent adjustment +2%, and the lifetime maximum increase is +5% over the start rate. Caps protect against extreme rate spikes.

Who is an ARM right for?

Borrowers who plan to sell or refinance before the fixed period ends. If you hold a 7/1 ARM for only 6 years, you benefit from the lower start rate and never experience an adjustment. The risk is that plans change.

How does the ARM qualify for income purposes?

Under CFPB Ability-to-Repay rules, conventional ARMs are typically qualified at the higher of the start rate +2% or the fully-indexed rate — not the initial teaser rate. Your income must support the stress-tested payment.

What index does the ARM rate adjust to?

Most modern ARMs adjust to SOFR (Secured Overnight Financing Rate) plus a lender margin. LIBOR-indexed ARMs were replaced after 2023. The margin is fixed for the life of the loan; the index changes.

Can a self-employed borrower get an ARM?

Yes — same income documentation as a fixed-rate conventional loan. For self-employed borrowers whose tax returns understate income, a Non-QM ARM (qualifying on bank statements) is also available, typically at a higher rate but lower than a 30-year Non-QM fixed.

What happens if rates go down during my ARM period?

Your rate adjusts down as well as up, subject to the floor and caps. If the index rate drops below your start rate at adjustment time, your payment decreases. The floor is typically the margin itself (the index can go to zero, but your rate won't fall below the margin).

Can I refinance out of an ARM into a fixed-rate loan?

Yes — this is one of the most common reasons people choose ARMs in the first place. You start at a lower rate, build equity during the fixed period, and refinance to a fixed-rate loan before the adjustment begins if rates are favorable.