Types of Home Loans for Purchase
Types of Home Purchase Loans
Buying your first home? Whether it's your first home, a vacation home, or an investment property, PennyMac has many types of home loans with a variety of product and terms to choose from. Review the loan products below, then talk to a PennyMac Loan Specialist at (866) 549-3583 to review the best rates and options for your situation.
PennyMac offers hybrid ARMS - adjustable rate loans that carry a fixed interest rate for 3, 5, 7, or 10 years, then the interest rate changes each year based on a market index. ARMs typically start with lower monthly payments than fixed-rate loans, but once the fixed period ends, the payment will change - either up or down - as the interest rate changes with market conditions.
A hybrid ARM loan is not an interest only loan and does not have a negative amortization option. PennyMac adjustable rate mortgages are fully amortizing loans in which the borrower pays both the principal and interest throughout the life of the loan. The term of the loan is typically 30 years.
After the fixed interest rate period has passed, the length of which varies by hybrid ARM product, the interest rate and payment will adjust annually. So, a 3/1 ARM is fixed for three years and adjusts once per year at the expiration of the fixed period. The loan has caps, or specific limits, that the interest rate cannot exceed when it adjusts. These caps are based on the start rate of the loan, which is the rate the loan had when originated, and the current rate.
Because your payment and interest rate can increase, you should be prepared financially for any possible increase in rates and payment, if you're considering an ARM.
An ARM could makes sense for you if you:
- Plan to sell your home or refinance before the end of the initial rate period and therefore aren't concerned about possible rate increases
- Anticipate your income rising enough in the coming years to cover higher mortgage payments if interest rates go up.
- Want the initial lower payment that the ARM offers to qualify for a larger loan, but can afford to pay the fully indexed rate
- Believe that mortgage interest rates may decline in the future and can accept the risk if they don't.
When shopping for a mortgage, a hybrid ARM can be a good choice for some borrowers. There are many types of home loans, so talk to your PennyMac loan officer to see if an adjustable rate loan makes sense for you.