The truth about the VA hybrid loan

by Illinois Mortgage Rates on March 30, 2010

In today’s marketplace when we hear the word hybrid and almost immediately think of green energy are some sort of new automobile. What does the word hybrid really mean? Hybrid is when you take parts from two or more items and put them together for a better outcome. When we think of a hybrid loan for veterans or VA loans we should immediately think of both the fixed rate mortgage and the adjustable rate or veritable. The main characteristic of the VA hybrid is that it carries a fixed rate mortgage for a period of time and then the interest rate becomes adjustable after that fixed rate period.

The Department of Veterans Affairs offers to eligible veterans to types of hybrid loans. The first, is the 3-1 hybrid and the second is the 5-1 hybrid. LowVARates is well aware of the big misconceptions, misunderstandings, and flat our rumors that exist in the marketplace about VA hybrid loans. We hope to dispel these rumors and educate eligible veterans on the truth about the VA hybrid loan.

The following is a list of common misconceptions or rumors about the VA hybrid loan:

  • it is an adjustable-rate mortgage and will cause me to lose my home.
  • This is the type of our loan that the media has warned against.
  • The interest rate can go as high as it wants.
  • I will never pay my balance down.
  • This is not a VA loan, because the Department of Veterans Affairs would never endorse this type of loan.

LowVARates will dispel these rumors and teach eligible veterans the truth about the VA harbored loan and how it may benefit them.

Many veterans think that because the VA hybrid loan does have an adjustable rate; this fact alone will cause them to eventually lose their home. The truth is, this loan does have an adjustable interest rate, however this is a much more stable interest rate than all other adjustable-rate mortgages. The Department of Veterans Affairs requires that VA lender’s use a very stable index, known as the CMT. The CMT index is a monthly average of the U.S. Treasury index. The treasury index is one of the most stable financial indexes from a historical perspective. In regards to veterans losing their homes, an adjustable-rate mortgage and the payment goes along with it has nothing to do with those individuals who have unfortunately lost their homes. Those individuals who lost their homes were most likely put into a mortgage that did not benefit them, or bought a home that they never intended to be able to afford. The VA has never allowed veterans to use a stated income loan or to buy a home which is more expensive than what the veteran can afford.
Our society has become more and more dependent upon the media for gathering information. This is not a bad thing by itself, however, when the media is filling our minds with incorrect information a problem does arise. The fact the matter is most of our mainstream media has actually no knowledge VA loans or even the mortgage industry in general. There is some truth to the idea that the media has created, which is that adjustable-rate mortgages should be avoided at all costs. There is a big difference between a standard adjustable-rate or conventional adjustable mortgage and the VA hybrid adjustable mortgage. When the media talks about all of the negative parts of adjustable-rate mortgage the media is referring to the option arm loan, the subprime arm, and other conventional adjustable rate mortgages.

Many veterans think that the interest rate on the VA hybrid arm can go as high as it wants. There is nothing further from the truth than this. The VA hybrid loan has both annual interest rate caps and lifetime interest rate caps. Let’s look at the 5-1 arm for example. The interest rate on the 5-1 hybrid arm cannot increase at any time in the first five years of the loan. The interest rate in essence is fixed for a minimum of 60 months. Once the five-year introductory period is up then the interest rate can only go up 1% per year. Most veterans don’t stop to realize that the interest rate can also go down 1% per year. The fact that the Department of Veterans Affairs has put interest rate Is on this loan show is that the VA is focused on creating an adjustable-rate mortgage that has protection against rising interest rates. Just like there are any ON the VA hybrid loan, there are also lifetime caps. Assuming veteran This loan until they pay off the home or until they moved, the interest rate can never go higher than 5% from where it started. For example if your start rate on the hybrid loan is 3% then you could never have an interest rate higher than 80% anyway take you at least 10 years to get that high.

If you have considered getting a VA hybrid loan in the past and have been told that you will never pay your balance down, you two have been majorly misguided. An interest only arm or an option arm are the only types of adjustable-rate mortgages that allow you to make a payment each month and not affect or pay down your principal balance. The VA hybrid loan is a fully enterprise adjustable-rate mortgage which means every single payment is applied towards a portion of the principal costs decreasing the balance on a monthly basis. As a matter of fact, the VA hybrid arm will pay your principal balance down faster for the first three or five years then a fixed-rate mortgage will in today’s lending environment.
Finally one more rumor and false information about the VA hybrid is that this cannot be a VA loan because the Department of Veterans Affairs would never guarantee or endorse an adjustable-rate mortgage. President Bush, right before he left office signed into law the veterans benefits improvement act of 2008. As part of the veterans benefits improvement act, the Department of Veterans Affairs renewed its effort to issue hybrid loans or VA adjustable-rate mortgages to veterans. The VA hybrid loan is backed by the Department of Veterans Affairs and the Department of Veterans Affairs actually guarantees to the VA lender that this loan will perform and be safe for veterans.

The moral of this story is don’t believe everything you hear in the media about veterans and adjustable-rate mortgage loans. Yes there are some toxic and dangerous arm loans or adjustable-rate mortgages in the marketplace, however the VA hybrid loan is not a dangerous loan when used correctly. If you’re a veteran and you would like to know how the VA hybrid loan can help you please contact approve the lender by visiting www.lowvarates.com.

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GUIDE FOR THE FIRST TIME BUYER

by IL Mortgage Experts on October 26, 2009

real estate

When anyone is purchasing a new home for the first time, you must make a list of the different features and factors that you, in particular, want in a home, and by putting all of these in a list will indicate, at some point, what kind of home or structure you will be able to buy like size, amenities, location, appliances, and other modern conveniences needed in the general area of the home, like schools, medical facilities, any recreational needs, parks, tennis courts, shopping centers, drug stores, auto mechanics, etc..So when Purchasing a new Home for the first time be sure you take into consideration the following:

You must ask yourself:  Is the area I am looking at going to be safe for my children and is it in a safe neighborhood and is that floor plan expandable, is the garage big enough and is there room for a pool in the back yard eventually, and what kind of sewer system does the house have, and what about fireplaces, and am I close enough to be able to walk to the beach or go fishing on a spur of the minute or is that master bedroom really big enough or what about the master bath, is there only a shower in the master bath or is there both a shower and tub or can I add a tub later and what about traffic in the morning and evening  and what about traffic noise, or is the house big enough for entertaining and do I have a yard that I will have to maintain, and if I don’t want to maintain it myself, what is the cost for a gardener each month.

These are a few of the important types of questions that you need to think about way before you start shopping for a new home, because even the most modern and up to date home communities today do not offer all of the conveniences or the amenities that many people think they are getting when buying a new home and this is true even in some of the most upper end gated custom home communities, where there are problems that many people do not anticipate before they make a decision to buy a home there.
One must also be aware of warranties on the building itself, and consider the warranties on the appliances, and what if you knock out a wall next year, how will that affect your building warranty.

What about insurance policies that have be in place, by law, when buying a new home, and what if something happens to you, who will make the payments and do the needed upkeep on the property, and do you really want a single family house, or will a condo, or town home fit your lifestyle better, because today’s modern condo complexes are quiet, secure, full of amenities, and there is no yard work required, or other maintenance costs like with a single family house.

Housing options in most cities are many, but making a decision on which place to buy can be very time consuming and complicated, as modern America has housing opportunities like no other country in the world and it can be easy getting into a place and then after a short time, realizing that this wasn’t the right home for you to begin with, and this will create many problems in your life.

If any problems start popping up like poor drainage, poor building construction, or cheap appliances that crash in a few months, or when it rains all the water runs into the garage, etc., what do you do then.

Buying a new home is a giant step and the best way of ‘buying a new home for the first time’ is being prepared and the best way of being prepared is to start writing everything down that you are looking for, and what you are not looking for.

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What Is The Minimum Credit Score For A VA Streamline in Illinois?

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Many veterans who are currently in a VA loan are hearing about the VA streamline refinance program (also known as the VA IRRRL program) and have had someone tell them that “there is a minimum credit score requirement” for the Illinois VA streamline refinance program.
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The crackdown on shady mortgage rescue scams has begun across the nation and is alive and well right here in Illinois. Last week, the Illinois Attorney General sued several companies under the Illinois Mortgage Rescue Fraud Act.

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