NMLS #2748687 · Company NMLS #2502308MBR
Short answer
SOFR, the Secured Overnight Financing Rate, is a published measure of what it costs to borrow cash overnight using U.S. Treasury securities as collateral. Most new ARMs use a 30-day average of SOFR as their index. When your ARM adjusts, the lender takes the index value from a set date before the change, adds your margin, rounds, and applies your caps. The Federal Reserve Bank of New York publishes SOFR and its averages every business day.
What is SOFR?
SOFR is a broad measure of overnight borrowing costs in the Treasury repurchase (repo) market. It replaced LIBOR as the main index for new U.S. mortgages after LIBOR was phased out in 2023. Fannie Mae requires its ARM plans to use the 30-day average SOFR, and FHA allows it as one of its approved indexes.
How does SOFR set my new rate?
Your new rate is the index plus your margin. Under Fannie Mae's standard ARM documents, the lender uses the most recent index figure available 45 days before the change date, adds the margin, and rounds to the nearest one-eighth of a point. Then the caps apply. The margin is set when you get the loan and doesn't change. See ARM rate caps.
Where can I check SOFR myself?
The Federal Reserve Bank of New York posts SOFR and the 30-, 90- and 180-day SOFR averages each business day on its website. Your ARM note says which average your loan follows.
I have an older ARM tied to LIBOR. What happened to it?
LIBOR stopped being published after June 30, 2023, and older LIBOR ARMs were moved to a SOFR-based replacement index. For FHA ARMs, HUD required the switch by the next adjustment date after that. Your servicer should have sent a notice of the change; if you're unsure, ask them which index your loan uses now.
Does the index matter when I choose an ARM?
Less than the margin and caps, which you can compare between offers. Nobody can predict where the index will be when your fixed period ends, so plan around the highest payment your caps allow. See ARM vs fixed rate.
Sources
- Federal Reserve Bank of New York, SOFR averages and index
- Fannie Mae Selling Guide B2-1.4-02, Adjustable-Rate Mortgages
- 24 CFR 203.49, FHA adjustable rate mortgages
- CFPB, ARM index and margin
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.