Not just your average, fixed-rate or adjustable-rate loan, a VA hybrid loan offers flexibility to the veteran homeowner. But what exactly is a VA hybrid loan, and why should I think about one?
An ARM, or Adjustable Rate Mortgage (ARM), is a mortgage where the interest rate is set for the initial period. These set terms are for three or five years with respect to a VA hybrid loan. When you think about it in terms of months, this means either a fixed term for thirty-six or sixty months. Either way, the interest rate is locked during the initial, fixed-rate period. For example, if your initial interest is locked in at 3.75 percent, it will stay at this rate for the specified term. The associate mortgage payment would be based on this initial rate and would not fluctuate. Following the initial, fixed-rate period, the interest rate would begin to adjust. However, a loan backed by the Veteran's Administration Department should not be confused with conventional or subprime adjustable-rate loans.
For good reason, a lot of veterans are leery of loans that are not of the traditional, VA variety. But one thing should be at the forefront of your mind: The VA requires approved lenders to use a market index that is given to stability and reliability when writing a hybrid loan. One very reliable tool is the Constant Maturity Treasury Index, or CMT.
So, does this imply that there are no risks for the veteran mortgage seeker? Although a hybrid loan will adjust AFTER the initial fixed term, historical data indicates that this movement will not exceed one percent for initial fixed terms of three years or less. For fixed terms of five years or greater, this same data indicates that a rate will not move more than two percent yearly. Again, the adjustment period begins AFTER the initial three or five year introductory phase. Furthermore, many forget that an adjustable-rate mortgage can adjust in one of two directions: up or down. If a rate can increase, it can also decrease.
The home-purchasing process can be nerve racking, but proper preparation will lessen any uncertainty. If you have additional questions about a VA hybrid loan, we recommend consulting an industry professional. Whenever possible, do not rush the homebuying process because you may be disappointed with a mortgage program you do not understand. And if you arm yourself with the necessary information, you will seamlessly purchase the home you desire.
An ARM, or Adjustable Rate Mortgage (ARM), is a mortgage where the interest rate is set for the initial period. These set terms are for three or five years with respect to a VA hybrid loan. When you think about it in terms of months, this means either a fixed term for thirty-six or sixty months. Either way, the interest rate is locked during the initial, fixed-rate period. For example, if your initial interest is locked in at 3.75 percent, it will stay at this rate for the specified term. The associate mortgage payment would be based on this initial rate and would not fluctuate. Following the initial, fixed-rate period, the interest rate would begin to adjust. However, a loan backed by the Veteran's Administration Department should not be confused with conventional or subprime adjustable-rate loans.
For good reason, a lot of veterans are leery of loans that are not of the traditional, VA variety. But one thing should be at the forefront of your mind: The VA requires approved lenders to use a market index that is given to stability and reliability when writing a hybrid loan. One very reliable tool is the Constant Maturity Treasury Index, or CMT.
So, does this imply that there are no risks for the veteran mortgage seeker? Although a hybrid loan will adjust AFTER the initial fixed term, historical data indicates that this movement will not exceed one percent for initial fixed terms of three years or less. For fixed terms of five years or greater, this same data indicates that a rate will not move more than two percent yearly. Again, the adjustment period begins AFTER the initial three or five year introductory phase. Furthermore, many forget that an adjustable-rate mortgage can adjust in one of two directions: up or down. If a rate can increase, it can also decrease.
The home-purchasing process can be nerve racking, but proper preparation will lessen any uncertainty. If you have additional questions about a VA hybrid loan, we recommend consulting an industry professional. Whenever possible, do not rush the homebuying process because you may be disappointed with a mortgage program you do not understand. And if you arm yourself with the necessary information, you will seamlessly purchase the home you desire.
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VA Home Loan program makes it easier for veterans to qualify for home financing with less stringent income and credit qualifications; just check out va hybrid loan as well as va loans.
