The Va Hybrid Loan: Find Out More, Choose What's Right For You

By Author: John Cory
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Not just your run-of-the-mill, fixed-rate or adjustable-rate loan, a VA hybrid loan offers flexibility to the veteran homeowner. But what are the differences, and is the VA hybrid loan ideal for your circumstance?

An Adjustable Rate mortgage, a.k.a. as an ARM, is a mortgage that has an initial fixed period, adjusting thereafter. These fixed terms are for three or five years when it comes to a VA hybrid loan. When you think of it in terms of months, this means either a fixed term of thirty-six or sixty months. Either way, the interest rate is set during the initial, fixed-rate period. For example, suppose you locked in an interest rate of 3.75 percent on a five-year, adjustable-rate hybrid loan. Your loan payment would be for a specified amount every month. Following the initial, fixed-rate period, the interest rate would begin to adjust. However, a loan backed by the VA should not be confused with conventional or subprime adjustable-rate loans.

Many veterans proceed with caution at the very notion of an adjustable rate mortgage, and a bit of trepidation is always good. But one thing to keep in mind ...
... is the following: The Veteran's Administration Department requires mortgage brokers and lenders to use stable and reliable market indices when offering a hybrid loan. The Constant Maturity Index, or CMT, is an index that offers this kind of stability.

So, does this mean that the service member's mortgage rate will not fluctuate? What this means is that AFTER the initial, fixed-rate period, CMT data trends suggest that hybrid-loan interest rates do not vary more than one percent each year. For initial fixed terms of five years or longer, historical data suggests that your interest rate will not vary more than two percent annually. Again, this is in response to market performance AFTER the initial fixed-loan period has expired. Additionally, many forget to consider the fact that adjustable does not mean that a mortgage rate must adjust one way or the other. Rates can increase, but rates can decrease in accordance with market activity.

As with any major financial decision, it is best to review your budget before becoming indebted for a large sum of money. 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 dissatisfied with a mortgage product you do not understand. And remember, a knowledgeable veteran is a happy home purchaser in the end.
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 or va streamline. If you want to save time, money and frustration simply get in touch Bridget A. Cancel best Veteran's loan specialist online.