A 3/1 ARM, or 3-Year Adjustable Rate Mortgage, is a type of home loan where the interest rate is fixed for the first three years. After this initial period, the rate adjusts annually based on market conditions. This means that your monthly payments can change after the first three years, potentially increasing or decreasing. This mortgage option is often appealing to buyers who plan to sell or refinance before the adjustable period begins. However, it's important to understand the risks, as rates can rise significantly after the fixed period, leading to higher payments in the future.