Loan Programs

Many different factors go into the mix to determine the right mortgage for you -- prime among them is the number of years you plan to stay in your house. For example, if you plan to stay in your house anywhere from one to three years, you might consider a 3-year adjustable rate mortgage (ARM). This type loan has a low start rate for the first three years than adjusts annually thereafter. Accordingly, if you plan to stay in your home for 3 to 5 years, 5 to 7 years, 7 to 10 years we have 5, 7, and 10 year ARM's as well as 30 and 15 year fixed rate loans.

Fixed Rate Mortgages - / 30 years / 15 years
The most common type of mortgage program where your monthly payments for interest and principal never change. Should interest rates go down, you could refinance since there is no pre-payment penalty.

Adjustable Rate Mortgage (ARM) - 10/1 ARM; 7/1 ARM; 3/1 ARM; 1 year ARM; 6 month ARM; 1 month ARM
These Loans begin with an interest rate that is lower than a comparable fixed rate mortgage, accordingly, the monthly payment is lower for the term that the rate is fixed, i.e., if the loan is a 10/1 is fixed for the first 1o years and adjustable every year thereafter. The rate and monthly installment can change dramatically after the specified interval of the ARM.

Standard Arms And The Differences - Choosing an ARM with an index that reacts quickly lets you take full advantage of falling interest rates.

Introductory Rate ARM's - Most ARM's have a low introductory rate, which is good anywhere from 1 month to as long as 10 years. One reason for choosing an ARM over a fixed rate is to take advantage of the lower rate when you know that your ownership of the property is for a limited time only.

London Interbank Offered Rate (LIBOR) - LIBOR is the rate on dollar-denominated deposits, also known as Eurodollars, traded between banks in London.

Balloon Mortgages - / 7 Year / 5 Year / 1 Year
Balloon mortgages are short-term mortgages usually ranging from 1 to 7 years. Monthly payments range from interest only to partially amortized installments. At maturity, the balloon mortgage must be paid in full -- the final payment is referred to as the balloon payment.

Interest Rate Buy Downs - The buyer would pay points above current market points in order to pay a below market interest rate during the first two years of the loan. At the end of the two years they would then pay the old market rate for the remaining term.

Cost Of Funds Index (COFI) - The ratio of the dollar amount paid in interest during the month to the average dollar amount of the funds for the month constitutes the weighted average cost of funds ratio for that month.

Indexing - It is the process of relating the rate of a loan to the numerical behavior of an index. For example, interest rates tied to the 11th District Cost of Funds Index are more desirable than those tied to LIBOR. Why? Because LIBOR is the rate on Eurodollar deposits, which are known to have some volatility, and the 11th District Cost of Funds Index that is known to be conservative and somewhat stable.

Graduated Payment Mortgage (GPM) - With a GPM the payments are usually fixed for one year at a time.



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