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Frequently Asked Questions (FAQs)

Federal and State Disclosures

Loan Programs

UP2 Using a Fixed-ARM loan program.

A loan program that is fixed for an initial term (usually 3, 5, 7 or 10 years) and then converts to an adjustable-rate program after the initial fixed term is a program that should be considered by many home buyers to reduce their interest rate and payment.  These fixed-adjustable programs go by a variety of names (e.g." intermediate ARMs", "hybrid ARMs" or “fixed-ARMs”).

This type of program is best suited to a borrower that predicts that the period of time they will be paying on the mortgage loan before paying it in full (usually because they sell the home or refinance) is less than 4 to 8 years.

Many borrowers have jobs that require geographical transfers every few years.  Other borrowers anticipate receiving an increase in earnings or a lump sum receipt of cash that would enable them to pay the mortgage loan in full within a 3 to 10 year period. Other borrowers may plan to pay the mortgage loan in full for a strategic reason (e.g. a borrower might want the loan paid rapidly to enable payment in full by the time they retire).

Whatever the reason, the borrower that only anticipates being in the mortgage loan for eight years of less can often obtain a much lower rate and payment than would available with a standard 30 year fixed-rate mortgage.

From a mere statistical stand point the use of one of these hybrid-ARM programs make makes more sense than a 30 year fixed-rate loan alternative since the average period of time to full payment for a borrower on a conforming loan is seven years or less on more than 95% of conforming loans originated in the United States.

An AmeriFund loan consultant can assist you in determining whether a borrower’s circumstances warrant consideration of a hybrid-ARM.