Qualification for ARMs

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Mortgage and Lending with Primex Mortgage

For conventional ARM products, you need to know how a borrower will be qualified. If the ARM product is for a 3 or 5 yr ARM, they will be qualified at; the Note plus 2% or the fully indexed rate plus the margin, whichever one is higher. If the ARM product is for a 7ry ARM, the borrower will be qualified at the Note rate. 

On a 5 yr ARM, if the Note rate is 3.5%, for 200k loan, the actual payment will be; $898.09. The borrower will be qualified at, $1135.58, an almost $240 increase for underwriting purposes. ARMs can be a great product, depending on the borrower and situation, but you need to be aware of how a borrower will be qualified, to make sure his or her loan is approved.

On FHA ARMs, they qualify borrowers at the Note rate.  For current daily rates, click here.

To calculate payments and compare, click here.

MD Loan Officer-NMLS 168983.

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