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Using mortgage calculator

Ways of Using a Mortgage Calculator to Understand Your Home Loan Options

You may use a mortgage calculator to figure out if you should buy a new house or refinance your current one. A home loan calculator can show you the numerous loan options accessible to you. A variety of factors might impact the number of your monthly home loan payments. To defend oneself, you must be aware of their existence. Make use of a house loan calculator to get an idea of how much you’ll be paying each month to help choose which form of loan is appropriate for your needs and circumstances.

An Introduction to the Use of a Mortgage Calculator

A house loan calculator visualizes their various mortgage options after entering relevant information about the property, such as the price, location, down payment, taxes, credit score, and other personal details. Your monthly payment and loan length can be estimated using a mortgage calculator. These online tools for borrowers include a summary of the principal and interest and ideas for monthly fees, principal and interest, property taxes, and home loan insurance, all of which are entirely free. The APR, the fixed-rate, and the interest rate are all included in the calculator’s useful information. Legal fees, title insurance, and other closing costs can be calculated with a few mice click on a home loan calculator.

Using a mortgage calculator is explained in-depth in the following paragraphs.
1. How to Pick a Loan Program
Your monthly loan payment may be affected by the kind of loan you choose when buying a new house. Use the home loan calculator program to get an idea of how much money you’ll be borrowing and how much you’ll have to pay back each month. Payments are calculated based on your loan option’s average interest rate and period. See how this affects your monthly home loan payment to determine which loan is best for you. Before choosing a loan type, you should evaluate your financial condition to ensure that payments will not be a burden. Before determining which loan to take out for your property, you should get the advice of a financial expert.

2. Become Familiar with Interest Rates
Using a mortgage calculator may help you better understand interest rates and make wiser choices when selecting a home loan. Using the calculator, you can determine the total amount of interest you’ll have to pay after paying off your loan. The calculator displays the average interest rate for each loan and experience modification. Experimenting with various interest rates is a smart idea to get the greatest option for you. When searching for a home loan, picking one with a lower interest rate is preferable as it guarantees that your financial capacity is not harmed. It’s best if interest rates are low so that your economic strength isn’t affected by them. The interest rate should be the most important concern when shopping for a home loan.

3. Credit Rating Scales
With your credit score, how much can you borrow for a home? To get an idea of how much you’ll be able to borrow, enter your credit score information into a home loan calculator. The program will analyze the credit score and provide a list of all the eligible loans to help find the best loan for different situations. The loan options you qualify for and the experience modification you receive are based on your credit score, salary, and debt. With a good credit score, you’ll be able to get a lower interest rate on a loan.

4. Recognize the significance of the loan payment
It is a prevalent misperception among homeowners that their monthly payment is allocated only to one item of expenditure. The use of a house loan calculator can assist you in better understanding how the expenses of the mortgage, taxes, interest, and insurance are allocated throughout the loan. The sort of loan you pick will impact the amount of money you pay each month. If you utilize a house loan calculator filled with useful features and capabilities, you will be able to see precisely where your money is being spent.

5. Compare the Interest Rates of Different Loans
After you’ve entered all the necessary information to obtain loan options, you have the option of comparing different loan options to examine the differences and balance the negative and positive aspects. The information you gain from meeting with a real estate finance professional should guide you toward a loan that you are confident you can repay. Using the calculator, you can see what would happen if you refinanced from a 15-year to a 30-year loan with knowledge of loan modification. Input multiple property prices and locations to get different results, so you may pick the home you want to purchase with all the required information.

Purchasing a home is a significant financial commitment that requires extensive study to ensure that it is the best possible investment for you. The advent of technology has made it possible for us to locate mortgage calculators quickly to assist us in evaluating the information we have and selecting a house that will not place financial pressure on us. Consult with a loan officer to help you make sense of the information you’ve gathered. After receiving all of the answers from the house loan calculator, you are ready to begin the home-buying process.

Citations
Fürstenau, B., & Hommel, M. (2019). Developing financial competence about mortgage loans by informal learning using banks’ online calculators. Empirical Research in Vocational Education and Training, 11(1), 1-33.
Heimer, R. Z., Kolliner, D., & Stehulak, T. (2015). Uncovering the Demand for Housing Using Internet Search Volume. Economic Trends.
Nordlund, A., & Ålander, N. (2019). Forecast Modelling of Future Events that Affect the Repayment Capacity of Mortgages.

Best time to purchase your first home

Purchasing a home is one of the most important financial decisions you will make in your life. Homeownership can be a great way to build equity and provide for your family’s future, but it also comes with significant responsibilities. You must understand what you are getting into before you buy a home. This blog article provides an overview of some of the key considerations when buying your first home.

1. Winter

Winter is the best time for buying a house. However, it is also the most competitive time to purchase a home. If you want to buy a home in the winter, make sure you start your search early. The earlier you start your search, the more likely you will be able to find the right home at the right price. In addition, it is smart to meet with a real estate agent to discuss your needs and wants before you begin your search. Your real estate agent can help you find the perfect home for you.

2. Buy when the demand is low

If you are looking to buy a home, it is best to avoid the summer months. The demand for homes is higher in the summer because families want to move. If you want to find the best home on a limited budget, it is recommended that you buy a home in the winter or early spring.

3. Buy when prices are low

If you are looking to buy a home, make sure you look for sales and price reductions. When sellers reduce their prices, they will accept less cash for their house. When sellers lower their asking price, it can save you thousands of dollars on your purchase.

4. Buy when interest rates are low

Interest rates are very important when purchasing a home. It would be best to consider how much money you will need to pay each month to cover the mortgage payment. If you have a high monthly payment, you may not be able to afford the amount needed to purchase a home. In addition, if you are borrowing from a bank, you will be required to put down 20% of the home’s total cost as a deposit. Ensure that you know how much you can afford to borrow and how much you can afford monthly payments.

5. Spring

Spring is another good time to buy a home. However, it is still considered to be a busy season. Many people are moving during this time of year. Therefore, you must do your research well before making any offers. If you don’t have enough information about a specific neighborhood, then you could end up buying something that you don’t like.

6. Consider your income

Before you decide to buy a home, you must determine whether or not you can afford the monthly payments. The first step is to calculate your monthly expenses. Once you have calculated your monthly expenses, you should subtract them from your current salary. After doing so, you should compare the difference to your monthly take-home pay. If you cannot afford the monthly payment, you should think about renting instead of buying.

7. Personal readiness

It is important to be ready to buy a new house. If you aren’t ready to buy a home, you shouldn’t even bother searching for one. Instead, it would be best if you waited until you were completely prepared to buy a home. This way, you won’t waste your time and energy trying to find a home that isn’t right for you.

8. Review your credit

One of the biggest mistakes buyers make is failing to review their credit reports. Reviewing your credit report is an easy task to help you understand where you stand financially. You should use this information to see what type of loan you qualify for. Furthermore, if you have bad credit, you should improve it by paying off debts and applying for a loan at a better rate.

9. Evaluate your life stage

Buying a home is a big decision. It is important to evaluate your life stage before shopping around for a home. Are you married? Do you have children? How old are you? These questions can help you determine what kind of home would best suit your needs.

10. Fall

Fall is also a great time to buy a home because many people are selling their homes at this time of year. Sellers often drop their prices to sell quickly. Therefore, you might want to check out real estate listings in the fall, especially if you live in a hot market. In addition to this, many sellers will lower the price of their houses in the fall.

11. Think about your lifestyle in the next five years

The best time to buy a house is when you think about your lifestyle in the future. If you plan on having kids soon, you should buy a bigger house. On the other hand, if you don’t plan to have kids anytime soon, you should focus more on finding a smaller place.

12. Don’t overthink the real estate market

Don’t get caught up in the hype surrounding the real estate market. There will always be ups and downs in the economy, but there is no reason to worry. Just keep an open mind and stay calm. However, if you feel nervous about the housing market, you should consider getting a loan.

In conclusion, a new home is a big investment. When buying a house, make sure that you do your research and know exactly the best time to buy a house and what you are looking for. Also, make sure that you follow these tips and tricks when purchasing a new home. Good luck!

What First-Time Homebuyers Should Know in Los Angeles

The day you are handed the keys to your first home in the City of Angels will feel like a dream come true. But searching for your first home and shopping for the right mortgage can prove to be an involved process. Here are a few things you should know before you embark on your quest.

1. The housing market is very competitive right now.

First, California is experiencing a housing crisis right now. There are more and more people in need of affordable housing, and fewer and fewer projects being developed. This has resulted in a massive housing shortage, which in turn has pushed prices through the roof.

That means that you may need to dig to find the best values in the Los Angeles housing market. There are still excellent values available, but finding them requires extra research.

2. You may qualify for an FHA loan.

The good news is that a lot of first time homebuyers qualify for an FHA loan. These loans are insured by the Federal Housing Administration, and offer quite a few benefits to keep housing affordable. You may qualify for a down payment of just 3.5%, and you could have lower closing costs. Interest rates on FHA loans are usually more affordable too.

Another important thing about FHA loans is that they can open doors which might otherwise be barred shut due to an imperfect credit score.

3. There are local programs to help you out.

The FHA loan is federally backed, but it is not the only government program you can avail yourself of if you need assistance buying your first home. You can also consider local programs to support new homebuyers.

Los Angeles County has a program called the Affordable Homeownership Program. If you are classified as having low or moderate income and you are a first-time homebuyer, you might be able to get down payment assistance. For one person, the maximum annual income as of 2017 to qualify for this assistance is $50,500. So, a lot of people will find that they qualify for this program.

4. There are more costs to buying a home than you may realize.

Another important thing to know as a first time home buyer is that the true cost of buying a home in Los Angeles (or anywhere) is higher than you may realize. It is not just the cost of your mortgage.

You also need to weigh in other expenses such as your down payment, home inspection fees, earnest money deposit, closing costs, cash in reserve, moving costs, and costs for repairs or renovations.

Those are just the one-time costs when you are buying the home; you also need to think about what you will pay in the future. Along with your mortgage premiums and interest, you will also need to account for mortgage or homeowner’s insurance premiums, property taxes, utilities, rental costs, and homeowner’s association fees where applicable, and the cost of future maintenance.

New homeowners sometimes end up in over their heads because they forget to calculate all these miscellaneous costs. But if you make sure you account for everything, you will know what you can really afford and you will pick a house which is right for you.

5. You will end up making renovations and improvements.

This is almost a guarantee, even if you are purchasing a house which is in excellent condition. You will probably want to personalize it and make it more your own. Make sure to set aside some extra money for those renovations—more than you think you will need.

6. Pre-approval may be crucial in getting the home you want.

One of the very first things you should do when you begin your search for your Los Angeles dream home is get pre-approved. Doing so can streamline the application process when you do find a home you want, and it makes it more likely that the seller will accept your offer. You will also find that you may qualify for lower costs all around, which is very important in this competitive market.

7. The school district will impact the cost of a home.

This is something which is easy to overlook if you do not have children yourself. You will pay more for a home which is in a top school district, and less for one which is not. If you do not have children and do not plan to in the future, you may be able to save money simply by choosing a home in another district.

8. You need to think about your future before you choose a home and mortgage.

Speaking of the future, there are a lot of questions you should ask yourself about your plans for the years ahead before you invest in a home and select a mortgage. For example, if you will likely be moving in a few years, an adjustable interest rate may save you a lot of money on L.A. housing. But if you think Los Angeles will be your permanent home, a fixed rate mortgage might be safer. You need to consider not only the money you can save now, but the money you could potentially save decades from now.

If you need help navigating today’s competitive housing market, Pacshores Mortgage is here. Call (310) 478-5005 to explore affordable mortgage opportunities and find out if you qualify for an FHA loan.

What is a Mortgage Loan?

A mortgage requires you to pledge your home as the lender’s security for the repayment of your loan. The lender agrees to hold the title to your property (or in some states, to hold a lien on your title) until you have paid back your loan plus interest. If you do not repay your mortgage loan, the lender has the right to take possession of your house and sell it in order to satisfy the mortgage debt.

Principal & Interest.

All Mortgages have two features in common:

Principal: The first feature is the mortgage principal, which in the actual amount you borrow. For example, if you take out $200,000 mortgage, you mortgage principal is $200,000.
Interest: The second feature is the interest, which is the money you pay for the use of the money you borrow. Interest rate are highly volatile and how much interest amount you pay over the mortgage loan depends upon many different factors. The interest you pay on your mortgage may be deductible. (Consult a tax professional for advice) The higher the income tax bracket the more you may save in taxes by owning your own home.

Amortization:

Over specific time of loan (30 years – 15 years – 7 years – 5 years – 3 years – 1 year, etc,), you will pay your mortgage gradually through regular, monthly payments of principal and interest. The amounts of these payments are calculated to let you own your home debt-free at the end of a fixed period. During the first few years, most of your payments will be applied toward the interest you owe. During the final years of your loan, your payment amounts will be applied almost exclusively to the remaining principal. This type of re-payment is called amortization. In addition, when you sell your home you will be required to pay back any remaining principal balance due on your mortgage loan to your lender.

Four major factors that affect your mortgage payments:

The price of the house is determined by location, size, special features (such as garage, a deck, an extra bathroom, extra master bedroom), and over all market condition. However, before you fall in love with your new home, learn the four factors that maybe the key to whether or not you can afford that house of your dream.

The size of your down payment,
The amount of your mortgage,
Your mortgage interest rate, and
Re-payment term of the mortgage loan you choose.

A change in any of these four factors will influence how much house you can afford. Examine each of these four factors in detail and carefully, so you can get a good grasp of your buying power.

Loan Process for Home Owners

1.Dream of a new home:
Every couple or a working individual has dreams of owing their own home. Owning a home is indeed a key to long term financial security and independence. Buying a home is the single most important economic decision in one’s life and one must be prudent and careful in selecting the appropriate mortgage lender. We offer unique and exceptional customer service with free loan analysis and recommendation of appropriate loan programs best suited to your needs.

Select a new home to buy:
However, selecting a new home is another vital decision and it must be done with proper consultation and through a reputable real estate agency. Your home is your investment and your dwelling as well, and it must be selected with care. If you have not selected a home thus far and would like to buy one or refinance your existing home, we have the expertise to meet your home loan needs. Meet or call your mortgage analyst to find out how much you qualify for. Find out if you can lower your existing monthly payments on your current mortgage or get the cash you need. You can begin the loan application process by getting your loan pre-approved.

2. Apply to Purchase a home or to Refinance
The key to start the loan process is to apply for a loan. Applying for a mortgage loan is merely a process to collect appropriate information regarding your income and credit history, however, it is the most essential step towards owing or refinancing a home. Don’t hesitate in applying for a loan, there is no obligation. Starting with the information you provide us, we will work to obtain approval for a loan that meets your purchase or refinance needs.

3. Get pre-qualified and then get pre-approved:
Get pre-qualified. First and foremost it puts you in a position as a homebuyer to know exactly how much you can afford. In addition, as a pre-qualified buyer you have a stronger standing than a buyer who is not pre-qualified. It is an important advantage in today’s fast paced real estate market. Next, get pre-approved. A pre-approval shows that you have provided the complete paper work (listed below) and your loan has been underwritten and approved. A pre-approval is strongly suggested as it will show the seller of a home that you are serious and qualified. It will also help to close the loan quickly and get you into your new home.

4. Shopping for the Right Loan
Looking for the right loan program can be difficult with so many types of loans to choose from. We recommend that a buyer consider some questions before buying a new home. Is this a starter home? Will I be moving in five years? How much can I afford per month? How much cash do I have available for down payment and closing costs? What will the payment be? Is this the right house for me? Is this the right loan program for me? Different loan programs work to your advantage in different situations. If you’re planning on staying in your home for several years a fixed loan may be best. On the other hand, if your goal is to sell in just a few years an adjustable rate with a lower initial interest rate or an interest only option may work more to your advantage.

Another key factor in understanding different loan programs is to be aware of the relationship between points and interest rates. The more points you pay the lower the interest rate may be. A point is considered prepaid interest and is tax deductible. Each point is one percent of the loan amount. Paying points on your loan can lower your interest rate but increase your upfront costs.

Shopping for and comparing loans can be tricky. There are many programs, each with different rates and different points. What loan is right for you? We take pride in our seasoned loan analysts and their ability to help you choose which loan is appropriate for your goals and needs.

5. Organize essential documents and get credit report

Purchase a Home

Last two years W-2s and current pay stubs covering one month for salaried employees.
Self-Employed persons please provide the last two years of tax returns and an YTD profit and loss statement.
For rental properties please provide rental agreements and the last two years of tax returns.
The last three months of current bank statements for each account.
Copies of 401K, IRA, Pension or other retirement savings.
Divorce Decree, if applicable.
Bankruptcy papers (all schedules) and Discharge if applicable.
Name and address of your landlord, if applicable
Letter to explain any derogatory credit.

Refinance a Home

Last two years W-2 and one month of current pay stubs for salaried employees.
Self-Employed persons please provide the last two years of tax returns and an YTD profit and loss statement.
For rental properties please provide rental agreements and the last two years of tax returns.
Most recent mortgage statements on all owned properties.
The last three months of current bank statements for each account.
Copies of 401K, IRA, Pension or other retirement savings.
Divorce Decree, if applicable.
Copy of Homeowners/Hazard Insurance Policy
Names, address, phone numbers and account numbers of creditors to be paid at closing.

Get a Credit Report

Obtaining a credit report is essential and it has to be done in the early phase of the loan application and loan process. A lender is not in a position to offer or quote an interest rate or a loan program without knowing your FICO score or without examining your credit report. Perfect credit, not so perfect credit, or even bad credit doesn’t imply that you are automatically approved or can not be approved for a loan, and it also doesn’t imply that you have less chances with bad and more chances with good credit. It is merely a device to determine a loan program and interest rate, but an essential and necessary step that every loan applicant must take.

6. Select loan program and lowest rate

Choose a loan program

30 year fixed
15 year fixed
1 Year Adjustable Interest Rate (ARM)
2 year ARM
5 year ARM

Choose a loan type

Jumbo loan
Conforming Loan
Refinance with cash out
Refinance with no cash out
No Closing Cost Loan
FHA Loan
VA Loan
Cal Vet Loan
Imperfect Credit Loan
No income verification loan
Commercial Real Estate
Equity Loan

7. Loan approval and sign the documents

Once we have received your completed loan application, our approval process begins. This involves verifying the following information:

Credit report
Employment and income history
Personal Assets; bank accounts, stocks, pension, mutual funds, 401K, and IRA.
Property value and title report

Additional documents or verifications may be requested depending on your individual situation.

Helpful hints to improve your chances of a loan approval:

Fill out the loan application completely and clearly.
Provide requested documents requested in a prompt manner, this can be especially crucial if you have planned to close your loan on a certain date or have a rate locked in.
Do NOT make any large purchases. Increasing your debt can have a negative affect on your current application. Large purchases include, but are not limited to: automobiles, furniture, appliances, another house or time-share.
Bank account balances may be verified shortly before the close of a loan, be sure not to move money out of your account. If you move money into your account you will need to show where it came from. If you are receiving a “gift of money” from a friend or relative be sure contact your loan officer to get a form to use as a “gift letter”.

After your complete loan application is approved and any additional items have been turned in your final closing papers will be drawn. You will be contacted for an appointment to sign them in front of a notary. After you sign, they will be returned to the lender for final review and funding. After the loan is funded and the money is disbursed, title to the home will record in your name.

8. You now own your new home.

Loan Process For Lenders

The Application: The key to the loan process. Using verifiable information you provide us, we work to obtain approval of your purchase loan.
Ordering Documentation: We order a full credit report, verification of employment verification of funds to close, mortgage or landlord ratings, and any other necessary supporting documentation. If you have a property already identified then an appraisal report is ordered and a preliminary title report is requested as well.
Good Faith Estimate and Truth In Lending Disclosure: We are required to prepare for you a Good Faith Estimate and Truth In Lending Disclosure within 3 days of the application submission.
Loan Processor and Loan Submission: After receiving the necessary supporting documents, the loan processor works to verify and reconcile the information and assure that the application is complete.
Loan Submission: If the loan package is complete, the Loan Processor submits to the underwriter for approval. The underwriter reviews your credit payment history and credit score, job stability, income ratios, down payment, closing cost, cash reserves and property appraisal.
Loan Approval: Once the loan is approved, we are ready to close escrow providing the property is ready and has met the terms of the sale contract. At this time escrow is informed of the loan approval status.
Funding: After all parties (You and the Seller) have signed the closing documents, they are returned to the to the lender for review of the complete package. If there are no further issues, then funds are wire transferred to escrow allowing completion of the transaction.
Recordation: When escrow receives the funds from the lender, the necessary documents are delivered to the county recorder’s office. Recording is the time that your purchase is complete. All funds distributed to the involved parties and escrow is officially closed.
You now own your new home.

Important Notes:

The property is the security for the loan. The lender will require an appraisal by a certified fee appraiser to assure that there is sufficient collateral. The underwriter will look for marketability, condition and value of the home.
Most loan programs require that funds be or must have been in your account for 3 months. A minimum of 5% down payment usually needs to be your own funds. The remainder can be a gift by a relative, providing a gift letter and bank statement showing the ability to give is also provided.
Income ratios are based on your gross monthly income (before taxes). Bonuses, overtime, part-time or self-employment income must be likely to continue and is averaged over the last two years. The Principle, Interest, Taxes, and Insurance (P.I.T.I.) (plus Mortgage Insurance if applicable) is divided by the gross monthly income to get the top ratio. Take the PITI and all debts are added together and divided by the gross monthly income get the bottom ratio. Ratios needs vary based on the Loan To Value (LTV) or how much down payment is made.
Special programs can allow you to purchase with very little money, less than perfect credit, and income that is not verified.

Baloon Loan Program

7 Year Balloon, 5 Year Balloon, 3 Year Balloon

Balloon loans are short-term mortgages that have almost similar features of a fixed rate mortgage. The loans provide a constant payment feature during the specific term of the loan, but as compare to the 30 year fixed rate mortgage, balloon loans do not fully amortize over the original term. Interest rate and payment stays the same until the loan is due. Characteristically, the entire loan amount is due in either 3, 5, or 7 years.

Remaining loan amount at the end of the loan term is required to be paid in full by the mortgage companies, which can be accomplished by refinancing the loan. However, many lenders provide other options such as a conversion feature at the end of the term. For instant, in some cases, the loan may convert to a 30 year fixed loan at the thirty-year market rate plus 3/8 of a percentage point. The balloon mortgage program with the conversion option is often called a 7/23 Convertible or 5/25 Convertible.

Balloon type loan programs are usually recommended for borrowers who are certain that they will be leaving their current house in 3, 5, or 7 years, or going to refinance the loan.

Advantages:

One of the advantages of balloon loan programs is that they tend to have the lowest interest rate and therefore lowest mortgage payment for the balloon period.
Lower initial monthly payments with option to refinance at the end of the term period.
Many balloon mortgages offer the option to convert to a new loan after the initial term.

Disadvantages:

The entire balance must be paid off or refinanced at the end of the term.
Always a risk of higher Interest rate if loan is refinance after balloon period.
Risk of foreclosure if you cannot make balloon payment, if you cannot refinance, or if you cannot exercise the conversion option.

Adjustable Interest Rate (ARM) Loan Program

7 year ARM, 5 year ARM, 3 year ARM, 1 year ARM, 7/1, 5/1, 3/1, 1/1

An adjustable rate mortgage (ARM) is a loan with an interest rate that can be adjusted at pre-set intervals. The amount of the adjustment depends on several factors outlined below. Some ARM loans have an initial period when the interest rate is fixed for a period of time 2,3,5,7,or 10 year. After the fixed period the loan converts to an adjustable rate mortgage. Some ARM loans are adjustable during the first year with adjustable beginning after 1,3,6, or 12 months. Usually, there is a cap on the rate, which determines the highest the rate could ever go after the ARM period is over. Adjustable Interest Mortgage (ARM) loans adjust based on the following factors:

Index:
The index of an ARM is the financial medium that the loan is “attached” to, or adjusted to. The most familiar indices, or, indexes are the LIBOR (London Interbank Offered Rate), 1-Year Treasury Security, 6-Month Certificate of Deposit (CD), Prime, and COFI (the 11th District Cost of Funds). Each of these indices moves up or down based on fluctuations in the financial markets.
Margin:
The margin is one of the most significant aspects of ARMs because it is added to the index to determine the interest rate that you pay. The margin added to the index is known as the fully indexed rate. As an example if the current index value is 4.250% and your loan has a margin of 2.0%, your fully indexed rate is 6.250%. Margins on loans range from 1.75% to 3.5% depending on the index and the amount of the loan.
Payment Caps:
Several loans programs have payment caps as a substitute of interest rate caps. These loans programs diminish payment shock in a rising interest rate market, but can also lead to deferred interest or “negative amortization”. Such loans normally cap your annual payment increases to 7.5% of the previous payment.
Interim Caps:
This limits how the interest rate can be changed each time it is adjusted. The cap is usually between 1 and 2%.
Lifetime Caps:
Practically all ARMs have a maximum interest rate or lifetime interest rate cap. However, the limit of lifetime cap varies within each company and different loan programs. Loans with low lifetime caps usually have higher margins.

Advantages:

ARM allows you to have lowest interest rate lower monthly payment for a short period.
You have option to refinance if interest rates drop.
Rates and payments may go down if rates improve.
It is a great program if you want to sell the house shortly.
May qualify for higher loan amount.

Disadvantages:

Normally one must refinance after the ARM period is over otherwise the rate could be higher.
It is likely that after the ARM period you might have to refinance at higher rate if the interest rates are high.
Payments may change over time.