Update ARM qualifying rate calculations for government loans

Date Available: Beta 4/23, Prod 5/21

Which customers are impacted?: 

Any customer currently using the Blend lender application. 

How to turn on:

• This feature will be automatically enabled on the dates listed above.

Purpose of Update and Benefit:

VA and FHA loans have different qualifying rate calculations for ARMs than conventional loans. In order to adjust the qualifying rate calculations, we have updated the calculations to account for these differences. 

Current Behavior:

Currently, ARM qualifying rate calculations are based on DU rules.

New Behavior:

Now available, ARM qualifying rate calculations will be adjusted for VA and FHA loans.

For FHA loans, below are the rules for qualifying rate calculation:

• 1 year ARMs (12 months), the qualifying rate is note rate + 1%
• 3 year ARMs (36 months), qualifying rate = note rate
• 5 year ARMs (60 months), qualifying rate = note rate
• 7 year ARMs (84 months), qualifying rate = note rate
• 10 year ARMs (120 months), qualifying rate = note rate

For VA loans, below are the rules for qualifying rate calculation:

• 1 year ARMs (12 months), the qualifying rate is note rate + 1%
• 3 year ARMs (36 months), qualifying rate = note rate
• 5 year ARMs (60 months), qualifying rate = note rate
• 7 year ARMs (84 months), qualifying rate = note rate
• 10 year ARMs (120 months), qualifying rate = note rate

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