Qualification for ARMs

Qualification for ARMs

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.

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