**Title: Understanding VA Adjustable-Rate Mortgage Loans: Benefits, Drawbacks, and Application Process**
**Whats a VA Adjustable-Rate Mortgage Loan?**
The Department of Veterans Affairs (VA) loans offer a unique opportunity for eligible active-duty service members, qualifying reservists, veterans, and surviving spouses to buy or refinance a home with a 0% down payment or equity amount. While fixed-rate VA loans are available, adjustable-rate mortgages (ARMs) present an attractive alternative for several reasons.
**What Is a VA Adjustable-Rate Mortgage?**
VA ARMs are hybrid ARMs, meaning they have a fixed rate for a certain number of years before adjusting. For example, O1ne Mortgage Inc. offers 5/1 ARMs for VA loans. This means the interest rate remains fixed for the first five years and then adjusts annually based on an index. These loans typically have 30-year terms.
**How Do VA ARM Loans Work?**
Different lenders may offer various types of VA loans, but heres a general overview of how a 5/1 ARM works:
– **5/1 ARM**: The “5” indicates the number of years the rate stays fixed initially. The “1” means the rate adjusts once per year after the fixed period ends.
– **Other Options**: Some lenders may offer 7/1 or 10/1 ARMs, which have fixed periods of 7 and 10 years, respectively. These longer fixed periods can be ideal for homebuyers who need more time to plan before their rate adjusts.
**VA ARM Rates**
All VA ARMs are tied to an index called the constant maturity treasury. On the adjustment day, this index is added to a margin to determine your new interest rate. Each time your payment adjusts, your loan is reamortized, meaning your payment is recalculated based on the new rate and the remaining term of your loan.
**VA ARM Rate Caps**
VA ARMs have caps on how much the rate can adjust up or down each year. A common cap structure is 1/1/5:
– **First Adjustment**: The rate can adjust up or down by a maximum of 1%.
– **Subsequent Adjustments**: The rate can adjust up or down by 1% each year.
– **Lifetime Cap**: The rate can adjust up or down by a total of 5% over the life of the loan.
**Refinancing a VA ARM Loan**
VA ARMs can be refinanced into fixed-rate loans. To ensure you have options, keep your credit in good shape. O1ne Mortgage Inc. requires a minimum median FICO® Score of 580 to refinance.
**Pros and Cons of VA ARM Loans**
**Pros:**
– **Suitable for Starter Homes**: If you plan to move before the rate adjusts, you can benefit from the lower initial fixed rate.
– **Low Initial Fixed Rate**: This allows you to pay more toward the principal, reducing your balance before the rate adjusts.
– **Caps on Interest Rate Increases**: The rate can only increase by a certain amount each year and over the life of the loan.
**Cons:**
– **Unpredictable Monthly Payments**: Unlike fixed-rate mortgages, your payment can vary year-to-year.
– **Caps on Interest Rate Decreases**: While caps limit how much your payment can increase, they also restrict how much it can decrease.
**How to Calculate Your VA Loan ARM Payments**
To calculate your initial VA ARM payment, youll need your initial rate, balance, and term length. Use an amortization calculator to determine your payment. For subsequent adjustments, youll need the new rate, remaining balance, and remaining term.
**How to Apply for VA ARM Mortgage Loans**
Many lenders, including O1ne Mortgage Inc., offer VA ARM loans. Be prepared to share information about your income, assets, and meet credit score requirements. O1ne Mortgage Inc. has a minimum credit requirement of 580.
**Lender Requirements for VA ARMs**
Your interest rate will be determined by factors such as:
– **Debt-to-Income Ratio (DTI)**
– **Employment History**
– **Loan-to-Value (LTV)**
– **Certificate of Eligibility (COE)**
– **Property Type**
**The Bottom Line**
VA ARMs offer a lower initial fixed rate, making them suitable for those planning to move before the rate adjusts. However, they come with less payment certainty year-to-year. If a VA ARM sounds like a good option for you, start an application online at [O1ne Mortgage Inc.](https://o1nemortgage.com) or call us at 888-372-8820.
**Keywords:** VA Adjustable-Rate Mortgage, VA ARM, VA loan, hybrid ARM, mortgage refinancing, O1ne Mortgage Inc., VA loan benefits, VA loan application, mortgage rate caps, VA loan refinancing.
