How does a ARM 5/1 loan work

[Horacio Gutierrez]

In a 5/1 ARM loan can the bank agree to a higher fixed interest rate for a 30 years mortgage when the 5/1 ARM loan is setup or do you have to wait after 5th year and then you will need to refinance into 30 year fixed loan or sell the home?

[Stephanie Medellin]

Also keep in mind that even though your payment will be lower initially for an adjustable loan, some lenders are going to want you to qualify based on the payment at the fully indexed rate, or your intial rate + 2%, or something similar.  

If you're trying to increase your buying power by taking the adjustable rate, it's probably going to be easier to qualify for a fixed rate loan.