A conventional adjustable-rate mortgage loan
(ARM) is a mortgage for which the interest rate and monthly payment change at scheduled intervals during the life of the loan. The interest rate is adjusted at those intervals by the lender and stated in the loan documents.
Features of a Conventional ARM
1. The initial interest rate is fixed for a specified period (1 to 7 years),
after which the interest rate is recalculated based on an index and margin
described in the loan documents.
2. A variety of annual and lifetime interest rate change caps are available
that determine the maximum percentage of the interest rate change
.
3. Some ARMs have a conversion option to convert to a fixed-rate mortgage
loan at a specified time.
4. There is NO NEGATIVE AMORTIZATION.
5. Single-family detached homes, townhomes, approved condominium units
and multiple units up to four living units may be eligible for conventional
ARM financing.
6. Purchase or refinance transactions for conventional owner-occupied and
vacation/second homes may be eligible for conventional ARM financing.
7. Mortgage insurance is generally required when putting less than 20%
down 80% loan-to-value ratio
8. There is no prepayment penalty for a conventional ARM.
IMPORTANT CONSIDERATIONS FOR THE APPLICANT
A. The initial interest rate and monthly payments are typically
lower than for a conventional fixed-rate loan.
B. A required down payment of as low as 5% may be available.
C. The payments may DECREASE as interest rates decline.
D. The convertible ARM offers the financial flexibility to convert
to a fixed-rate mortgage loan.
E. The applicant is able to afford more home as the initial interest
rate and monthly payments are lower than for a conventional fixed
rate loan.
ADDITIONAL ADVANTAGES OF A CONVENTIONAL ARM
1. A VARIETY OF ARM PROGRAMS ARE AVAILABLE.
2. Advance approval may be available to provide the applicant with credit approval
before entering into an agreement to purchase a home.
3. The lock and roll feature may be available to initially lock in an interest
rate and discount points for a selected ARM program and then have
the ability to change to a fixed rate mortgage loan prior to closing
4. Many interest rate and discount point combinations are available
John DeBrito
SOLD Real Estate Company
Phone-719-270-1167
E-Mail soldrealestate@comcast.net
