ADJUSTABLE RATE MORTGAGES (ARM)

ARMs usually begin with an interest rate that is 2 - 3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home.

However, the interest rate changes at specfied intervals depending on changing market conditions; if interest rates go up, your monthly mortgage payment will go up, too. Alternatively, if rate go down, your mortgage payments will drop as a result.