Because of the risk of your monthly payment becoming unaffordable due to ARM loan rate increases, lenders set more stringent qualifying guidelines for ARMs than for fixed-rate mortgages. In general, you’ll need:
Higher credit score minimums. Conventional ARM loans may require a score of 640 versus the standard 620 score for fixed-rate mortgages.
Higher down payment minimums. You’ll need to come up with a higher down payment if you choose a conventional ARM loan to buy a primary residence or vacation home.
Proof you can qualify at the fully indexed payment. Some ARM programs require proof that you can qualify at the “fully indexed” payment, which is typically the maximum payment amount allowed over the life of the loan. Check with your loan officer to make sure you know the guidelines.