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The VA Hybrid Loan: Learn More, Choose What's Right For You

By Bridget A. Cancel

Republish: EasyPublish™
Published: 15Mar2012
Word count: 1500
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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 exactly is a VA hybrid loan, and why should I consider one?

An ARM, or Adjustable Rate Mortgage (ARM), is a mortgage where the interest rate is fixed for an initial period. For the VA hybrid loan, this initial period will be set for a term of either three or five years. When you do the math, this is a fixed period of either thirty-six or sixty months, respectively. During this fixed period, the interest rate for said mortgage will not fluctuate. For example, if your initial interest is locked in at 3.75 percent, it will remain at this rate for the specified term. This means the payment will be for a designated sum, which is conveniently predictable. After this time, the interest rate will begin to adjust. However, do not confuse VA loans with conventional or subprime, adjustable-rate mortgages.

Rightfully so, many veterans are concerned with the very connotation or reference to an adjustable-rate mortgage loan. But one thing to keep in mind is the following: The Veteran's Administration Department requires lenders to use stable and reliable market indices when offering a hybrid loan. From a historical perspective, the Constant Maturity Treasury Index (CMT) is one of the more stable indices of the financial marketplace.

So, what does this mean for the veteran homeowner? This means that although the hybrid loan will adjust AFTER the initial fixed period, historical data suggests that your interest rate will not fluctuate more than one percent annually. For initial fixed terms of five years or longer, historical data suggests that your interest rate will not fluctuate more than two percent annually. Again, the adjustment period begins AFTER the initial three or five year term. Another thing to consider when discussing adjustable-rate mortgages is the fact that interest rates will do just that: adjust. While an interest rate can adjust upwards, it can also adjust downwards.

As with any mortgage loan, it is wise to borrow slightly less than you can comfortably re-pay on a monthly basis. If you have additional questions concerning a VA hybrid loan, we recommend consulting an industry professional. You want to make certain you understand the mechanisms of any proposed mortgage prior to the application process. And if you arm yourself with the necessary information, you will easily purchase the right home for you and your family.

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 and va loans.

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