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How is the fully indexed ARM rate calculated?

Calculating the Fully Indexed Rate

The fully indexed rate is the sum of the value of the applicable index and the mortgage margin, which is then rounded to the nearest one-eighth percent.

Note: Unless specific product terms provide otherwise, if the index plus gross margin equals a number that is equidistant between the higher and lower one-eighth percent, Fannie Mae rounds down to the nearest one-eighth percent.

The applicable index value that determines the fully indexed rate is any index value in effect during the 90 days that precede the note date.

For additional information, see B2-1.4-02, Adjustable-Rate Mortgages (ARMs).

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