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Short answer
It depends on how long the rate is fixed. For a conventional ARM fixed for 5 years or less, the lender qualifies you at a higher rate than your starting rate, so your debt-to-income ratio is figured on a bigger payment. For ARMs fixed longer than 5 years, the lender can usually qualify you at the starting (note) rate. The goal is to make sure you can handle a payment increase.
What rate do lenders use to qualify me?
Under Fannie Mae's rules for conventional loans:
- Fixed 3 years or less: the highest rate that could apply in the first five years after the first payment.
- Fixed 5 years: the greater of the note rate plus the first adjustment cap, or the fully indexed rate (index plus margin).
- Fixed more than 5 years (7 or 10): no less than the note rate, with an exception for higher-priced loans.
FHA, VA and other programs have their own rules, and lenders can be stricter.
Why do lenders do this?
A short fixed period means the payment can rise soon. Qualifying on the higher payment lowers the chance of payment shock, when a borrower can't keep up once the starting rate ends. Federal ability-to-repay rules point the same way.
Does an ARM let me qualify for more house?
Not always. With a 5-year ARM or shorter, you may qualify for about the same as with a fixed rate, because the qualifying payment is higher than your starting payment. A 7- or 10-year ARM is qualified at its note rate, so a lower starting rate can mean a lower qualifying payment. Either way, borrow based on the payment you're comfortable with, not the most you can qualify for. See getting pre-approved.
Do NH property taxes count in the qualifying payment?
Yes. The qualifying payment is the full monthly housing cost: principal and interest, property taxes, insurance, mortgage insurance and any HOA dues. In New Hampshire, taxes vary a lot by town, so the same price can qualify very differently in two towns. Try the NH property tax calculator.
Can a seller-paid buydown help me qualify on an ARM?
Fannie Mae allows temporary buydowns on ARMs fixed for three years or more, but you're qualified without the bought-down rate. See seller credits and buydowns.
Sources
- Fannie Mae Selling Guide B3-6-04, Qualifying Payment Requirements
- Fannie Mae Selling Guide B2-1.4-02, Adjustable-Rate Mortgages
- Fannie Mae Selling Guide B3-6-03, Monthly Housing Expense
Checked November 10, 2026. Rules and dates change, so confirm current details before you rely on them.
General information only, not tax or legal advice. Program availability, eligibility and terms vary by lender and are subject to change and to underwriting approval. Not a commitment to lend.