Can I get a 5% down Arm Loan?

Question

My partner and I have been researching real estate for a couple years now and are ready to take the first step towards financial freedom. We are looking to use either an FHA loan or an ARM to buy a single family home, that we intend to house hack, and BRRR. We are leaning towards an ARM loan because we do not intend to hold the property for more than 5 years and we believe that the terms are more favorable to our situation than an FHA loan. We specifically like the fact that with an ARM we do not have to live in the property for a year like an FHA loan requires. Our main inquiry is: How common is it to get an ARM with 5% down (or something very close to that)? Also people who have experience with ARM loans, what are some common pitfalls, and things to watch out for?

Please post any and all information you think would be helpful!

Best,

Eli

Please post any and all information you think would be helpful!

Best,

Eli

Madeline Malinovsky · Answer

Hi Eli - Conventional financing still expects you to live in the property as a primary residence for a year when you structure this way, so watch out as that's not just an FHA requirement. Regarding ARMs, most competitive ARM products want to see a 10%+ down payment. I'd reach out to a local lender to get accurate quotes, as 5% ARM products are not very common. We're in CA, TX, MA, and AZ if those are applicable :)

With ARMs you generally anticipating refinancing out of the loan (or selling the home) when the fixed period is up, so as long as you know you're going to refinance, there shouldn't be too many pitfalls. On the lender's side, they often have to qualify you at a higher rate than the fixed rate you start with, but that's not as much your concern.

James Jeter · Answer

Hi Eli,

You can get a conventional ARM with 5% down payment. See Fannie Mae Eligibility Requirements