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        What is an FHA Hybrid Adjustable Rate Loan?           

Adjustable Rate Loans are loans in which the interest rate will possibly change at some future date.

The FHA hybrid adjustable rate mortgage loan is one of the best adjustable rate mortgages currently available.  It is available 1-4 unit owner-occupied principal residences (ie. townhomes, and PUDs.) and   for loans to be insured under sections 203(b)(single-family mortgage insurance), 203(h)(disaster victims), 203(k)(rehabilitation loans), and 234(c)(mortgage insurance on condominium units).

Highlights of the New Program

In addition to 1-year ARMs, under this rule change, FHA may insure ARMs on single-family properties that have interest rates that are fixed for the first three years, five years, seven years or ten years of the mortgage term and adjusted annually thereafter. The 1-, 3-year and 5-year ARMs allow a one percentage point annual interest rate adjustment after the initial fixed interest rate period and a five percentage point interest rate cap over the life of the loan. The 7-year and 10-year ARMs allow a two percentage point annual interest rate adjustment after the initial fixed interest rate period and a six percentage point interest rate cap over the life of the loan.

For loans that are originated after April 28, 2005 HUD will insure a new 5 Year Hybrid ARM product.  The new product will have CAPS of 2/6 which means that after the initial 5 year period it can change a maximum of 2% per year or 6% over the life of the loan.  This program will also probably allow a 6% maximum change after the initial 5 year fixed terms.  This loan is more standard to conventional loans and may result in better pricing for the consumer as it is better received in the secondary markets.

Borrowers choosing the 1-year ARM must qualify for payments based on the contract or initial rate plus one percentage point (1%). This only applies to the 1-year ARM where the loan to value (LTV) is 95.00 percent or greater. Borrowers choosing the 3-, 5-, 7- or 10-year ARMs are to be qualified at the entry level (note) rate (i.e., there is no requirement to underwrite at one percentage point above the note rate as there is for 1-year ARMs).

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 JournalApply for your FHA Hybrid Arm today.

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 adjustable rate mortgage is that you can "streamline refinance" to a FHA fixed rate mortgage at anytime.

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)

FHA Hybrid Adjustable Rate Loans

FHA 2-1 buydown (FHA 203b, Not Allowed on FHA 251)

Energy Efficient Mortgages Program

Reverse Mortgages for Seniors


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