Adjustable Rate Mortgages
and Interest Buydowns

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Chapter 2
Mortgage Credit Guidelines
Page 2-13

Effective March 3, 1998, borrowers who are utilizing an adjustable rate mortgage (ARM) with a loan to value (LTV) for any transaction NOT subject to the revisions in ML 98-29. The LTV (95% or greater) must qualify at the initial rate plus 1%, i.e., the anticipated second year rate. (LTV is defined as the base loan amount divided by the appraiser’s estimate of value, or the percentage shown on line 14a of the HUD-92900-WS.)

For all adjustable rate mortgages, regardless of the LTV, we will no longer permit any form of temporary interest rate buydown.

Please see: HUD Mortgagee Letter 98-01.