VA Home Loans

VA ADJUSTABLE RATE MORTGAGE
Adjusting to Your Future With a VA ARM

The VA offers Adjustable Rate Mortgages, a home loan in which the interest rate and monthly payments for P&I (principal and interest) may change during the life of the loan.

A VA Adjustable Rate Mortgage, or ARM, differs from a fixed rate loan in this major way: with your fixed rate loan, the P&I payments and interest rate are constant. ARMs also differ from GPMs (graduated payment mortgages) in that with GPMs, the payment amount increases over the first 5 years of the loan while the interest rate remains the same.

With a VA ARM, your quoted interest rate is the interest rate that will be charged for the first year of the loan, and it may remain in effect for 12 to 18 months depending on the change date set out in the terms of the ARM. That initial interest rate is agreed upon by the lender and the veteran, and must reflect current adjustable mortgage rates.

The change date is when the annual adjustment of the interest rate will occur, and it is always disclosed in the documents signed at loan closing. The initial change date must occur between 12 and 18 months after loan closing, and then annually on the same date.

Perhaps you've got a powerful career track in the military; in the next five years, you see your salary rising. You're undecided about the constancy of a Fixed Rate Loan and the lower payments available through an ARM.

A VA HYBRID ARM HOME LOAN COULD BE JUST RIGHT FOR YOU

The VA Hybrid ARM Home Loan offers an initial fixed interest rate for a period of three or five years, and then it adjusts annually.

For example, a 3/1 or 5/1 VA Hybrid ARM offers a 1% annual interest rate adjustment after the initial fixed interest rate period, with a 5% interest rate cap over the life of the loan. Interest rate adjustments occur on an annual basis, (except for the first adjustment which may occur no sooner than 36 months from your first mortgage payment on the 3/1 VA Hybrid ARM Home Loan or 60 months from your first mortgage payment on the 5/1 VA Hybrid ARM Home Loan.)

So, as your salary rises, you can manage larger payments; and having smaller mortgage payments to start can fit your current military lifestyle today.