First
Mortgage Programs
Fixed
Rate Loans - The interest rate and payment remain the same over the term of the
loan. Loans can be amortized over
the following terms: 10, 15, 20, 25, 30, and 40 years. The
advantage of a fixed rate program is that it allows you to get
a fixed rate, over a specified period, without being concerned
about market fluctuations. This
type of financing is recommended for borrowers who intend to
stay in their house for a long period of time. This type
of loan is available for good credit and bad credit mortgages.
Fixed
Rate Balloons - Both
interest rate and payment remain the same until the loan is
due. Typically, the entire loan amount is due in either 3, 5,
or 7 years. The advantage of balloon programs is that they
tend to have the lowest rates, due to the fact that the entire
balance must be paid off or refinanced at the end of the term.
This type of financing is recommended for borrowers who know
they will be leaving their current house in either 3, 5, or 7
years. This type of loan is available for good credit
and bad credit mortgages.
Adjustable
Rate Mortgage (ARM) - Both
interest rate and payment remain the same for a fixed time
period, usually 1, 3, 5, 7, or 10 years. At the end of that
period the rate can rise at fixed intervals. The amount the
rate can rise, or margin, is
predetermined (normally 1/2% to 2% per rise). The intervals
are normally 1, 3, 6, or 12 months. Typically there is a cap
on the margin, which determines the highest the rate could
ever go. The advantage of an ARM is that it allows you to get
a lower rate, for a known period of time, while you watch the
market to see if and when fixed rates get better. Some feel
that although they may have gotten a better rate with a
balloon, an ARM will adjust at the end of the "fixed
period", whereas a "Balloon" has to be
refinanced or paid in full. ARMs are recommended for those
borrowers who intend to stay in their house for a fixed period
and have taken the time to factor in the margin, to determine
that they would not be better off with a Fixed Balloon or even
a Fixed Rate. This type of loan is available for good
credit and bad credit mortgages.
Buydown
- Both rate and payment remain the same for a fixed
period, at the end of which, the rate and payment increase.
The rate and payment may increase once, twice, or even three
times, depending on whether the Buydown is a 1/1, 2/1, or 3/1.
The percentage of increase, as well as number of increases is
predetermined. Once all of the increases have occurred the new
rate and payment remain fixed for the term of the loan. Also,
lenders will typically charge a fee to "buy the rate
down" for the first 1, 2, or 3 years of the loan. The
advantage to a Buydown is that it offers a lower rate and
payment during the first few years of the loan. Buydowns are
recommended for those borrowers who are having trouble
qualifying for a Fixed Rate Loan or those who need a more
affordable payment at present. This type of loan is
available for good credit and bad credit mortgages, but is not
always advisable in a credit repair situation.
Loan
Types:
Conforming
- Conforming loans refer to loan amounts that conform to
government service standards as determined by Fannie Mae &
Freddie Mac (the original government agencies, set up in the
early 1940's, established to help people finance new homes).
Conforming loans range in amount form $1 to $227,150. Although
not all conforming loans are serviced by these government
agencies, the mortgage industry has adopted the term to
express loan amounts in this range. These are for
clients with very good credit only, as they must conform to
strict guidelines.
Jumbo
(Non-Conforming) - Jumbo
loans refer to those loan amounts outside of the
"conforming" range or, above $227,150. This
type of loan is available for good credit and bad credit
mortgages.
Investment
Properties (Non-Owner Occupied)
- These types of homes are normally acquired specifically
for investment purposes or are owned as a result of moving to
a new house without selling or being able to sell the old
house. Financing for investment properties can be achieved
using any of the above described programs. Typically, the
rates for financing on investment properties are higher than
owner occupied homes and the LTVs allowed are lower, due to
the fact that default rates tend to be higher on these types
of loans. This type of loan is available for good credit
and bad credit mortgages.
B,
C, D Credit -
Just
because your credit isn't perfect does not mean you can't
obtain financing. Most, if not all of the above described
programs can be utilized even if a borrower does not have
perfect credit. In these cases the rates will be higher and
LTVs allowed will be lower. Most lenders have special
divisions specifically created for the marketing and sales of sub-prime
products. Also, most lenders will offer special limited
programs as incentives, when they recognize an area where
there is a need.
No
Document or Low Document Loans
- In certain situations it is either difficult or
impossible for potential borrowers to show a lender their
income on paper. In these instances any of the above described
programs can be used, but under circumstances called NIV
or No Income Verification. All of the other program
parameters must be met, however, in the case of income, a
borrower may only be required to show a operating license or
business license and/or limited income information. With this
type of financing, rates offered tend to be slightly higher.
This type of financing is recommended for self-employed
borrowers or borrowers who have difficulty showing their
income on paper, for one reason or another. This type of
loan is available for good credit and bad credit mortgages.
Purchases
- All of the above described programs can be used in the
financing of a new house. It is recommended that potential
borrowers compare and contrast the different types of
financing based upon their personal goals and financial
situations. In no way are the programs described above, all of
the programs offered in the mortgage industry. These
descriptions are only to serve as an overview of the more
popular programs offered and used. This type of loan is
available for good credit and bad credit mortgages.
Cash-Out
Refinances -
Occasionally,
when refinancing a
borrower wants to "cash out" some of the equity that
has been built into the loan. Under specific conditions,
established by the lender, a borrower can actually receive a
check for an amount of money that meets those conditions.
Cashing-Out is not normally limited to any type of loan
program, it can be done with most of the described programs.
Texas has specific guidelines regarding this type of loan.
This type of loan is available for good credit and bad credit
mortgages.
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