Loans Types

At Settlers, we want you to be in control when getting an online mortgage so it’s important to understand the mortgage options available to you.

Adjustable rate (ARM)

An adjustable rate mortgage has an interest rate that can increase or decrease. This can be helpful for a buyer borrowing during a period of low interest rates. ARM rates are tied to the interest rate of Treasury bills. When that index goes up or down, your interest rate follows.

The main draw is that an introductory ARM interest rate is typically lower than a fixed rate, allowing borrowers to buy more house than they could with a fixed rate mortgage.

The most popular adjustable rate mortgage is the 5/1 ARM. This rate lasts for 5 years, and may change every year after.

ARMs are not as simple as fixed rate loans. You may see an offer listed as a 5/1 ARM with 3/2/6 cap, interest rate determined by the Treasury bill rate plus 2%.

This is an adjustable rate mortgage with a fixed rate for 5 years followed by a rate adjustment every 1 year. The first adjustment is capped at 3%, while later adjustments are restricted to a change of 2% or less. The lifetime interest rate cap for this loan is 6% over your initial rate, never more. There is a 2% margin, meaning 2% is added to the Treasury bill rate.


Lenders want to give choices. Every borrower has a unique situation. This can make the decision process a little tricky.

Remember that different loan terms will result in a very different loan experience. A 30-year loan will have a lower payment paired with a higher interest rate, costing more of the life of the loan. On the flip side, a 15-year loan will have a higher payment paired with a lower interest rate, saving you money over time.


You don’t have many options when it comes to interest rates. A lot of this is decided for you based on your credit score and borrower profile.

Adjustable rate mortgages are something to consider. Introductory rates are typically much lower than either 15 or 30-year fixed loans. If you’re savvy with finances, this could be an option for you

Down payments

The amount you put down on your new home has a big impact. It affects your monthly payment, and even what loan programs you’re eligible for. Down payments range from as little as 3.5% to more than 20%, with most lenders ideally looking for 10-20%.

The Learning Center is an educational tool and the content is for information purposes only and is not intended to provide investment, legal, tax, or accounting advice, nor is it intended to indicate the availability or applicability of any Settlers product or service to your unique circumstances. All examples are hypothetical and for illustrative purposes. Although we have obtained content from sources deemed to be reliable, Settlers and its affiliates are not responsible for any content provided by unaffiliated third parties. You may wish to consult an appropriate advisor about your unique situation. The applicability of this information to your circumstances is not guaranteed. You should obtain personal advice from qualified professionals.