Pros and Cons

ARM loans are great, especially if you have limited money to get into the marketplace. Their interest rates are typically lower than conventional fixed-rate residential loans, which allows you to borrow more. This can translate into more purchasing options.   

The downside is that, because the interest rate fluctuates throughout the term, skyrocketing interest rates will lead to skyrocketing monthly payments. Ensure that you can handle the maximum payment requirements if your interest rate rises, and learn how margins, caps and adjustment intervals will affect your monthly payment (as well as how and when each is calculated).