Does the FHA accept adjustable rate mortgages (ARMs)?
The FHA does allow ARMs subject to these strictures. The ARM must use the one year Treasury bill as an index; maximum annual rise in the interest rate must be 1% and the cap on total increase in interest over the life of the loan must be 5%. Hybrid ARMs are that have 3, 5, 7 and 10 year fixed rate terms at the beginning of the loan are also acceptable, subject to defined increase caps.
