Loan Programs
The 3 biggest factors in determining what type of mortgage program is right for you is:
1) Your Risk Tolerance
2) The Term or Length of time you plan on keeping the home
3) A loan officer that is focused on "Your Best Interest" !
Length of Time to Keep Property |
Loan Types to Consider |
10 or more years |
15, 20, 30, or 40 year fixed-rate |
From 7 to 10 years |
15, 20, 30 or 40 year fixed-rate, |
From 3 to 7 years
|
5/1 or 7/1 ARM |
From 1 to 3 Years
|
6 month ARM, 1 year ARM, 3/1 ARM |
Fixed-Rate Mortgages:
This is the best choice if you’re looking for a consistent long-term, stable loan. Fixed-Rate Mortgage means that the payment (principal & interest) will remain constant and throughout the entire life of the loan. Regardless if interest rates go up or go down your payment will remain the same. However if rates do go down you can usually refinance into that lower rate.
Fixed-Rate Mortgage are from 15 year to 40 years in length and the only thing different is the term (length) of the loan. The shorter the term equals a higher payment but also will cost you less in the total amount of interest that you will pay over the life of the loan.
Adjustable Rate Mortgages (ARM)
An adjustable-rate mortgage (ARM) means that the interest rate changes over the life of the loan — according to the terms specified in advance.
With an ARM:
- The initial rate is usually lower than with a Fixed-Rate Mortgage.
- The interest rate may be adjusted (up or down) at predetermined times with the Index that it is tied to.
- The payment (principal & interest) will adjust . If the Index goes down so would your payment and if the Index goes up so would your payment.
- There is more market risk to having an Adjustable-Rate Mortgage than a Fixed-Rate Mortgage!
Adjustable-Rate Mortgage Terms:
10/1, 7/1, 5/1, 3/1
The first number represents the years that the loan has a Fixed-Rate and then the interest rate will adjust to the Index that it is tied to.
Interest Only - Adjustable Rate Mortgages
With an interest-only mortgage loan, you pay only the interest on the mortgage in monthly payments for a fixed term. After the end of that term, you refinance, pay the balance in a lump sum, or start paying off the principal, in which case the payments jump skyward.
Here are the basic types of Interest Only Adjustable-Rate Mortgages:
3/1 – 5/1 – 7/1 – 10/1
The first number represents the years that Interest-Only will be paid on the loan.
You have the option of paying down principal whenever you want.
This type of mortgage allows you to maximize your buying power and buy a higher priced home than a traditional 30 year Fixed-Rate Mortgage would. But it also comes with more market risk also!
No Doc or Low Doc Loans
These are types of loans that the lender is not requiring you to provide the traditional type of paperwork for. With these types of loans you will need to have a much higher credit score to qualify for and the lenders will charge a higher interest rate and or extra fees to obtain the loan.
Links for additional information on ARM's:
Equal Housing Lender 