The adjustable rate mortgage (ARM) is often a bargain. This is also the case with 30-year, fixed-rate loans under 10 percent.

Some important details you should know about your ARM selection are:

• How often will it adjust?
  
  
• What is your index? The index is the identified base used to set your rate every time it adjusts, for example, a one-year treasury security for a one-year ARM.
  
  
• What is your margin? Margin is the spread between the index and your new rate at the time of adjustment.
  
  
• What are your caps? Caps are the maximum adjustments allowed, both short-term and for the life of the mortgage loan.

FLEX MORTGAGES - WHAT THEY CAN DO FOR YOU

"Flex" is a slang phrase assigned to a loan that will change types in the future. The key to understanding the description is the number assigned to the word "flex." For example, for the 5/1 flex, it means a 5-year fixed-rate mortgage with a change to a one-year ARM for the remainder of the term after the initial five-year period.

These loans are available in many variations. In exchange for this future adjustment, the initial fixed term will be at a substantial lower interest rate than a full-term level fixed-rate mortgage.

It is important that you read the disclosure form for the loan you select. You should understand exactly what the worst case scenarios could be in the future. All of the adjustment terms should be clear. The features will include all of the standard ARM loan descriptions such as the index, margins and caps.

A MORTGAGE THAT'S RIGHT FOR TRANSFEREES

There is a very popular loan available that is almost customized for the transferring borrower. It is called a "balloon" mortgage. The loan is amortized for 30 years, and you will get a substantial break on the interest rate if you are willing to let the investor call the entire balance due at a present future date (usually five or seven years).

However, there are safety features included in this type of mortgage. There is guaranteed renewal at the end of five or seven years at the interest rates available at that time. Most of them only guarantee a new loan if you meet certain conditions (like making your payments on time).

If you decide to stay in your home, you can refinance to avoid the future balloon or call on your note.

The interest break you will get for selecting one of these loans can be as much as one full percent (for example, an interest rate of 8.25 percent when fixed interests are higher).

THE RIGHT MORTGAGE FOR YOUR CONDO OR TOWNHOUSE

When the economy goes through tough times, condos and townhouses tend to decrease in value more than single-family residences.

Because of this, mortgages for such residences have special requirements. Most lenders will want the units to be at least 60 percent owner-occupied. This reason for this requirement is the assumption that owners will maintain the complex better than renters and the homeowners' association will be stronger.

Once you find the unit you like, you will need to get the answers to the following questions:

• Is the FHA approved? (These are the easiest to finance.)
  
  
• What is the percentage of owner occupancy? The higher the percentage, the better.
  
  
• Does any one entity own more than 10 percent of the units? If so, this usually makes it hard to finance.
  
  
• Is the homeowners' association financially sound and owned totally by the individuals in the complex?