You need to ask lots of questions and read the fine print carefully about adjustable rate mortgages (ARMs). Terms and conditions (e.g., payment caps) vary widely, and it is definitely "buyer beware." A key factor, in addition to cost, is how long you plan to stay put. If it is more than a few years, especially when interest rates are rising, you are taking on a lot of risk (of future rate hikes) with an ARM. A fixed rate loan might be better. Find out what the "highest possible cost" with an ARM could be with the maximum rate hike. Could you afford it? If you plan to be in your home for seven to eight years or longer, it is generally better to pay a few points and get the lowest fixed interest rate possible because you will be making payments a while.

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