5/1 Mortgage: The Best of Both Worlds
Lower interest rates and a fixed payment for 5 years means you get the best of both worlds with our 5/1 Mortgage. If you are in the D.R.O.P. program and are thinking about refinancing your mortgage, this may be the loan for you!
A 5/1 ARM is an adjustable rate mortgage that has a fixed rate for the first five years of the loan. The payments are based on a 30 year term. The first five years of the loan feel like a fixed rate loan. Once this period has been reached, the loan will begin to adjust every year. This is not a “discount loan” where you are paying a lower rate than market requiring an upward adjustment with each change period. If market rates are unchanged then no adjustment in the rate or payment occurs.
If rates do change then there are caps that prevent the payment from rising too fast. There is a maximum adjustment cap of 2 percent per adjustment and a cap of 5 percent for the life of the loan. After the first 5 years the adjustments will be once a year and the rate can either increase, or decrease, depending on economic market conditions. Closing costs typically range between $900 – $3,000.
5/1 ARM Benefits
You may want to use a 5/1 ARM if you intend to live in your home for less than five years or if you intend on paying down your mortgage once you are out of the D.R.O.P. By choosing this type of mortgage, your payment will be lower since the initial five-year interest rate is less than a conventional 30 year loan rate.
If the home is not sold before the five year fixed portion of the loan is reached, you can either refinance or keep the loan as an adjustable rate until you sell the house.
For a mortgage that offers you the best of both worlds – low rates for a longer tem – call our mortgage specialists for more information today.
CONTACT THE LOAN DEPARTMENT TO MAKE AN APPOINTMENT WHEN READY TO APPLY.
PLEASE TAKE INTO CONSIDERATION THAT THE LOAN PROCESS TAKES AT LEAST ONE HOUR.
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What documents do you need to apply:
- Driver’s license (if not currently a member).
- Divorce decree (if applicable)
- Proof of Income ( 2 paystubs or Pension Statement). Signed Income Tax Return if self employed or having rental property(ies).
- Proof of additional income, such as Social Security benefits, child support, or alimony (if applicable)
- Federal income tax returns for the previous two years (if self-employed)
- W-2 forms for the previous two years
- Previous two years’ and year-to-date profit and loss statements (if self-employed)
- Balance sheet for the most recent quarter (if self-employed)
- Sales contract
- Proof of earnest money deposit
- Proof of homeowners insurance (needed before closing)
- Contact information for homeowners association (if applicable)
- List of other properties under your name with the following information: address, Mortgage company, balance, monthly payment, taxes & insurance, amount of rental or lease received.
- Court documentation for bankruptcy or judgment (if applicable)
- Listing agreement or sales contract for current home (if applicable
- Statements for checking and savings accounts for the last three months
- Statements for retirement funds and other investments for the last three months
- Copies of both Homeowners & Flood Insurance if applicable.
- Copy of OWNERS Title Policy.
- Copy of Survey (WITHIN 10 YEARS)
- Copy of 1st Mortgage and 2nd mortgage statement(s) if applicable.
A form 4606-T and the Credit Inquiry form will be provided by the Credit Union for your signature at the time of your application.