Loan Programs

• Fixed Rate Mortgages
• Adjusted Rate Mortgages (ARM)
• Standard ARMS and the Differences
• Introductory Rate ARM's
• London Inter Bank Offered Rate (LIBOR)
• Balloon Mortgages
• Interest Rate Buydowns
• Cost of Funds Index (COFI)
• Graduated Payment Method (GPM)
• Choosing The Best Program

LOAN OPTIONS
Below is a brief explanation of some of the most commonly used loan programs. Consult your loan agent for further details.

FIXED RATE LOAN
A loan, which has an interest rate that remains constant throughout the life of the loan, usually available for 30 or 15 years, even for 20 or 40 years, depending on the lender. Your payment is the same every month.

BUY DOWN
A fixed rate loan where the interest rate is reduced for the first 2 or 3 years, the rate remains fixed for the remaining years of the loan.

BALLOON LOAN
A fixed rate loan that is authorized over a 30-year period but becomes due and payable at the end of a certain term (5 or 7 years). May be extendable or may roll over into another type of loan, particularly if you still reside in the property, have no late payments in the past 12 months, and have not placed any second mortgages or liens on the property.

ADJUSTABLE RATE MORTGAGE (ARM)
A loan that has an interest rate that increases or decreases at specified times during the life of the loan, either monthly, twice a year, or once a year. Many adjustable rates are fixed for 3, 5, 7 or 10 years, then become adjustable with the rate changing once or twice a year. On all adjustable, the rate changes according to an underlying financial index. The most common indexes are Libor (London Inter-Bank Offered Rate), 1 Year T-Bill, Constant Maturity Treasury, 6 month CD, and 11th District Cost of Funds. The margin, which is added to the index to determine the new rate, remains stable throughout the life of the loan. Adjustable loans have lifetime caps, so you know ahead of time how high the interest rate could potentially rise.

"EASY QUALIFIER" LOANS
In cases where you have at least 10% to invest as a down payment on a property, some lenders waive their income verification requirements. In addition to the down payment, these loans require that you have good credit and at least 6 months of housing payments in the bank when the loan closes. Sometimes (especially with fixed rates) these loans carry a slightly higher interest rates than loans where income is verified.
 

PREPAYMENT PENALTY
Some lenders may offer lower interest rate on particular loan products if you agree to accept a prepayment penalty. In general, this penalty applies during the first three years of your loan should you pay off more than 20% of the loan balance in any given twelve months period. The penalty is typically 2% of the loan amount at the time of pay off. The penalty applies whether you are simply making extra payments, or whether you sell or refinance your home during the first three years.