7/1 ARM: Best Rates & Lenders

A 7/1 ARM is an adjustable-rate mortgage with a seven-year fixed period before the rate can change. Many lenders offer 7/1 ARMs, including Better, New American, SoFi, Guaranteed Rate, and Rocket Mortgage.

The post 7/1 ARM: Best Rates & Lenders appeared first on LendEDU.

A 7/1 ARM is one of several types of adjustable-rate mortgages. The “7” stands for the seven-year period in which the starting interest rate is fixed, and the “1” stands for the number of times rates may change annually after that initial period.

A 7/1 ARM is a good mortgage for people who are likely to sell or refinance their home within five to seven years of purchasing it, or for homebuyers who want the lower rates an ARM initially provides, but who want a longer fixed-rate period than a 3/1 or 5/1 ARM could provide.

This guide will introduce you to the basics of 7/1 ARMs along with some of our picks for the best lenders offering this type of loan.

On this page:

• What is a 7/1 ARM Mortgage?
• 7/1 ARM Rates
• LendEDU’s 5 Best 7/1 Mortgage Lenders
• Is a 7/1 ARM Mortgage Right for Me?

What is a 7/1 ARM Mortgage?

With any adjustable-rate mortgage, rates typically start out lower than they would with a fixed-rate loan. This can make mortgage payments more affordable for people trying to get into a house.

But the rates are tied to a financial index and can adjust after the initial fixed period of time. With a 7/1 ARM, the initial period when the rate doesn’t change is seven years.

A 7/1 ARM is an alternative to either a 3/1 or 5/1 ARM. While a 7/1 ARM may have a slightly higher starting rate than its counterparts, it should still start with a lower interest rate than you’d get on a fixed-rate loan. It will also provide a longer period of time before the rate can change.

7/1 ARM Rates

Adjustable-rate mortgages can be tied to different financial indexes depending on the lender. It’s common for the loan interest rate on an ARM to be linked to the one-year LIBOR, which is the London Inter-Bank Offer Rate.

Lenders will set your interest rate by adding a certain number of percentage points to the index. The number of points is called the margin. Then, your rate will increase or decrease with the index.

However, the rate you’re offered will not be based solely on the financial index it’s tied to. It will also be based on your own specific financial details, including:

• Your credit score
• The loan amount
• The size of your down payment
• Your debt-to-income ratio
• The location of the property you’re purchasing

Improving your credit score, putting more down, and minimizing your monthly debt payments can help you qualify for better mortgage rates.

Current 7/1 ARM Rates

National indexes that keep track of mortgage rates do not report on the current 7/1 ARM rate.

However, these indexes do monitor rates on 5/1 ARMs, which work very similarly to 7/1 adjustable-rate mortgages and which provide a better benchmark than prevailing rates for other kinds of mortgage loans.

Average 5/1 ARM mortgage rate	As of
nationalmortgage-mortg-1544-avgrate	8/29/2019

Source: Freddie Mac

Average starting interest rates on 7/1 ARMs are likely slightly higher than this benchmark. However, your own rate will vary based on your financial situation. You should get quotes from several of the top lenders to compare rates and loan terms to find the most affordable loan.

>> Compare other mortgage rates:

• 10-Year Mortgage Rates
• 15-Year Mortgage Rates
• 30-Year Mortgage Rates

LendEDU’s 5 Best 7/1 Mortgage Lenders

We analyzed the top mortgage lenders that offer adjustable-rate mortgages to help you compare the best options. Here are our picks:

1. Better
2. New American Funding
3. SoFi
4. Guaranteed Rate
5. Rocket Mortgage

1) Better

Better provides loans for both home purchases and refinancing, including jumbo loans and FHA loans. You have a choice between fixed or adjustable-rate mortgages.

Better’s down payment requirements are low and you can get pre-approval quickly. You also have the option to get help from a loan officer that isn’t paid on commission.  

Here’s what you need to know about Better’s adjustable-rate mortgage:

• Overall LendEDU rating: 5.00 / 5.00
• Minimum credit score: [better-mortg-1523-mincreditscore]
• Minimum down payment: [better-mortg-1523-downpaymentlow]
• ARM options: better-mortg-1523-armrange

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2) New American Funding

New American Funding provides purchase and refinance loans, as well as home equity loans and reverse mortgages. You can get a jumbo loan if you’re buying a more expensive home, and you also have a choice between a fixed or adjustable-rate mortgage.

New American also offers FHA, USDA, and VA loans.

Here’s what you need to know about New American’s adjustable-rate mortgage:

• Overall LendEDU rating: 4.72 / 5.00
• Minimum credit score: Not disclosed
• Minimum down payment: Not disclosed
• ARM options: newamericanfunding-mortg-1524-armrange

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3) SoFi

SoFi offers both purchase and refinance loans. These include jumbo loans, but not government-backed options.

You have your choice between fixed or adjustable-rate mortgages, and you’ll be able to complete the entire mortgage application process online.

Here’s what you need to know about SoFi’s adjustable-rate mortgage:

• Overall LendEDU rating: 4.44 / 5.00
• Minimum credit score: Not disclosed
• Minimum down payment: sofi-mortg-978-downpaymentlow
• ARM options: sofi-mortg-978-armrange

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4) Guaranteed Rate

Guaranteed Rate provides fixed and adjustable-rate mortgages. You can get a loan to purchase or refinance a home, and you also have the choice to get a loan backed by the government, including an FHA, USDA, or VA loan.

You can complete the whole loan application process online with Guaranteed Rate.

Here’s what you need to know about Guaranteed Rate’s adjustable-rate mortgage:

• Overall LendEDU rating: 4.39 / 5.00
• Minimum credit score: [guaranteedrate-mortg-1525-mincreditscore]
• Minimum down payment: Not disclosed
• ARM options: guaranteedrate-mortg-1525-armrange

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5) Rocket Mortgage

Rocket Mortgage is owned by Quicken Loans and provides loans to purchase or refinance a home, including jumbo loans for more expensive properties and loans backed by the USDA, FHA, or VA. You’ll have a choice of a fixed-rate mortgage or an ARM.

Pre-approval is quick and you can complete the application online.

Here’s what you need to know about Rocket Mortgage’s adjustable-rate mortgage:

• Overall LendEDU rating: 4.34 / 5.00
• Minimum credit score: Not disclosed
• Minimum down payment: rocketmortgage-mortg-1507-downpaymentlow
• ARM options: Up to 10/1

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How We Chose the Best Lenders

To pick the best 7/1 ARM lenders, LendEDU rated and ranked different mortgage loan providers offering adjustable-rate mortgages. We used a weighted average of nine different data points, including:

Is a 7/1 ARM Mortgage Right for Me?

There are some benefits to a 7/1 ARM including:

• A longer period of time before your initial interest rate changes than a 3/1 or 5/1 loan provides.
• Typically, a lower starting interest rate than with a fixed-rate mortgage—which can make housing payments more affordable upfront and make getting into a home easier.

But there are also some downsides, too, including the fact that your rate will eventually begin to change along with the financial index rate it is tied to. ARM loans are riskier than fixed-rate alternatives because of this uncertainty.

If you’d prefer a home loan that you can count on to cost the same for the entire life of the loan, a 15- or 30-year fixed-rate loan would be best.

But if you plan to sell the home after a few years and you’d prefer the lowest possible starting interest rate while you own it, you should look into a three- or five-year ARM.

Before applying for any loan type, you should:

• Check your credit report for potential red flags and resolve or improve them.
• Determine how much you can pay for a down payment.
• Compare rates and eligibility requirements from a few of the best mortgage lenders to see if you can both afford and qualify for a home loan.

The post 7/1 ARM: Best Rates & Lenders appeared first on LendEDU.