When considering an adjustable rate mortgage (ARM), always look at the worst-case scenario. How long will the initial interest rate remain in effect and what will the interest rate be after the first adjustment? How high can the interest rate go if rates continue to rise? How long will it take for the rate on the ARM to reach the maximum allowed under the loan program? If these numbers don't match your budget, you may want to buy a cheaper house or wait to accumulate more funds to qualify for a fixed-rate loan.