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ARM Alternative

ARM Alternative products are a temporary buydown on a fixed rate loan. Want the low initial interest rate of an ARM but the payment security of a fixed rate loan?  The difference between the ARM Alternative and a normal temporary buydown is that we, not the borrower, builder or seller, pays for the costs of the buydown. ARM Alternative loans are available with either conventional fixed rate loans, FHA, or VA loans. One of our lenders is now financing the cost of the buydown which will save money by making the rate lower.

A temporary buydown is a reduction in the interest rate you actually pay on your loan for a stated period of time.

Conforming ARM Alternative

  • It's a fixed rate, not adjustable
  • It's a temporary buydown of the permanent, fixed rate
  • Three buydown options are available
    • Option 1: 2% - 1%
    • Option 2: 1.5% - .75%
    • Option 3: 1% - .50%
  • Eligible properties:
    • 1-4 unit primary residences
    • 1 unit second homes
  • Eligible transactions:
    • purchase and rate/term refinances
    • cash-out refinances if:
      1. FNMA first mortgage (FHLMC will be eligible when systems enhancements are complete)
      2. Maximum loan amount is $417,000
      3. each borrower has a minimum credit score of 660
  • Maximum financing
    • 95% LTV for primary residence purchases
    • 90% LTV for 1 unit second homes
  • Qualifying rates:
    • start rate for primary residences
    • note rate for second homes
  • 30 year term and interest only is available
  • Maximum loan amount is $417,000

Non-Conforming ARM Alternative
Same as the above with the following exceptions:
  • Minimum loan amount is $417,001
  • One buydown option is available: 1% - .50%
  • Only primary residences - No second homes
  • Ratios are 33/38 to 90% LTV and 28/36 over 90% LTV
  • Qualifying rate:
    • if LTV 75.01 to 95%, qualify at second year rate
    • if LTV 75% or less, qualify at start rate
  • Subordinate financing is not allowed
  • Extended locks or rate cap and float-down options are not available
  • Purchase transactions only
Example Of The ARM Alternative Mortgage Compared To Other Mortgage Plans

This example, based on a $100,000 loan for 30 years, demonstrates how the ARM Alternative's lower qualifying rate allows you to buy more house.

 
  ARM
Alternative
Fixed
Rate
1 Year
ARM

Qualifying Rate 7.0% 8.5% 7.5%

Note Rate 9.0% 8.5% 5.5%

Qualifying Payment $665.30 $768.91 $699.22

Income Needed to Qualify
For The Mortgage Payment
$28,500 $32,950 $29,950


ARM Alternative Program fills these needs:

 
Borrower Need Feature
Low Cash To Close Get a 95% Loan-to-value with a lender funded buydown 
Home Affordability And Easy Qualification Qualify at first year rate.
Payment Security Interest rate is known over life of loan
Speed Prequalification/pre-approval fast and free

Read more about Arm Alternative Closing Costs

As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your consumer and mortgage debt is structured today can have a life changing effect in the years to come.  Read more about this free, no obligation service.

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