is an FHA ARM (Adjustable Rate Loan)?
FHA Adjustable Rate Mortgage Loans are loans in which the interest rate will possibly
change at some future date. The FHA Adjustable Rate (ARM) program has the standard 1 Year Arm
and also the popular Hybrid Adjustable Rate
The FHA Adjustable Rate Mortgage(ARM), 1 year ARM loan is one of the best adjustable rate
mortgages currently available. It is available 1-4 unit homes, as well as
condominiums, townhomes, and PUDs.
One benefit of the FHA Adjustable Rate 1 Year ARM is that it does not offer an initial low "teaser"
rate like most other adjustable rate mortgages, therefore it will normally start
at a slightly higher rate than most other adjustable loans. Thus you will most
likely not have a large first adjustment.
The yearly interest can rise or decrease no more than 1% per year
vs. 2% for a conventional loan.
The lifetime cap of the FHA adjustable rate mortgage is no more than 5%
over the initial start rate vs. 6% for a conventional loan.
Therefore, a fha arm can take 5 years before reaching its maximum rate vs. a
conventional loan can cap in only 3 years.
FHA's adjustable rate mortgage is based on the economic indicator index called
the 1-Yr. T-Bill. You can find the current T-Bill rate on many websites
like HSH Associates or in the
Wall Street Journal
Index + Margin = Fully Indexed Rate
(current 1 Yr. T-Bill Rate) + (percentage, usually 2.75%) = Interest Rate
Index = 1.3%(as of Oct 2003) + Margin of 2.75% = Fully Indexed Rate = 4.05%
Other benefits of the fha arm (adjustable rate mortgage) is that you can "streamline
refinance" to a FHA fixed rate mortgage at anytime.
Borrowers must qualify for one-year ARMs using the
mortgage payments based upon the contract or initial interest rate plus 1
percentage point (i.e., the anticipated maximum second-year interest rate) if
the loan-to-value ratio is 95 percent or greater.
Click on the title to learn more about that program:
Standard fixed rate (FHA 203b)
Rehab Loan (FHA 203k)
Condominium Loans (FHA 234c)
FHA adjustable rate mortgage (FHA 251)
Adjustable Rate Loans
FHA 2-1 buydown (FHA 203b,
Not Allowed on FHA 251)
Energy Efficient Mortgages Program
Reverse Mortgages for Seniors