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VA adjustable-rate mortgage (ARM) loans come with lower initial mortgage rates than VA 30-year fixed loans. This can save a homebuyer money each month for years before the adjustable period expires.
What is a VA ARM loan? It’s a loan offered by lenders and sponsored by the Department of Veterans Affairs. It comes with an initial fixed-rate period – typically five years – then the rate adjusts with the market afterward.
Why would someone get one? If you’re just going to carry the loan for a few years anyway, there’s little point in paying a higher rate for a 30-year fixed loan. For instance, if you’re on active duty and plan to sell at your next PCS orders, an ARM might be a good choice.
Over the past decade, rates have been so low that most homebuyers chose a 30-year fixed loan. Now that rates are rising, an ARM might be a better choice. You can afford more home.
How much lower your VA ARM rate will be versus a fixed loan depends on your lender. Some companies will offer comparatively low rates, while some lenders’ ARM rates might be the same as their fixed rates. Shop around to find the lowest VA rates for your situation.
VA Fixed Rate | VA ARM | |
---|---|---|
Affordable monthly payment | $2,500 | $2,500 |
Mortgage rate* | 6% | 5% |
Taxes, insurance, HOA dues | $300/mo | $300/mo |
Max loan amount incl. funding fee | $368,000 | $409,200 |
Max home price | $360,000 | $400,000 |
Mortgage rates are for demonstration purposes only. Rates and the difference between fixed and ARM rates may not be available. Get a personalized quote here.
Standard adjustable-rate mortgages
Interest-only adjustable-rate mortgages
Yes. The VA home loan program allows fixed-rate and adjustable-rate loans.
A VA ARM rate can rise a maximum of 5% above the start rate. For example, a VA ARM with a 5% teaser rate could rise to 10%. The rate won’t automatically rise that much. The actual increase or decrease depends on interest rates at the end of the initial fixed period.
A VA ARM loan comes with a rate that can adjust up or down after its initial fixed period. It comes with a lower rate upfront compared to VA 30-year fixed rate mortgages.
The disadvantage of an ARM loan is that the rate can rise after the initial fixed period. This could cause your payment to rise. Most ARMs come with caps which limit how much the interest rate can rise at each adjustment period.
A VA ARM loan isn’t the answer for everyone, but it can reduce your payment in a time of rising rate and home prices.
Check with your lender and look at your situation. An ARM loan might make you a homeowner soon than you thought possible.
Start your VA ARM mortgage.Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.