Loan Programs
There are many loan programs to fit almost any need. Please call and ask which loan program best fits your situation.
Recommended Programs
Use the information below to choose the best program for your need.
| Years you plan to stay in the house: |
Recommended Program(s): |
|---|---|
| 1 - 3 | ARM |
| 3 - 5 | ARM, Balloon |
| 5 - 7 | Balloon |
| 7 - 10 | Conventional |
| 10+ | Conventional |
- Fixed Rate Mortgage (FRM)
A fixed rate mortgage, or FRM, is a mortgage loan where the interest rate on the note remains the same throughout the term of the loan. Conventional, FHA and VA all offer fixed rate loans.
- Balloon Mortgage
In some respects, a balloon loan looks very much like a 30-year FRM. The payments are calculated in exactly the same way. In both cases, the payment is the amount required to pay off the mortgage in full over 30 years. Where the two instruments differ is that, after a specified period, generally 5 or 7 years, the outstanding balance (the "balloon") has to be repaid in full. Some balloon programs may be converted to a fixed rate after the 5 or 7 years, with a very low fee and at the current market rate.
- Adjustable Rate Mortgage (ARM)
- An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on a variety of indices. Consequently, payments made by the borrower may change over time with the changing interest rate (alternatively, the term of the loan may change).
Which Program is best for me?
Here are a few things to keep in mind when selecting a loan program.
| Fixed Rate Mortgage (FRM) | ||
|---|---|---|
| Advantages: | Disadvantages: | |
Maximum interest deduction for taxes, sometimes easier to qualify, stable predictable payments, high loan to value, lower down payment, possible secondary financing if needed. |
Pay more interest over the life of the loan, higher starting interest rate over adjustable rate loans, lower debt ratio (requires a higher income than adjustable rate loans in order to qualify), higher monthly payment. |
|
| Balloon Mortgage | ||
|---|---|---|
| Advantages: | Disadvantages: | |
Lowest starting interest rates help qualify for higher loan amounts. Preferred by those planning to sell before the balloon period expires. |
Periodic payment and rate increases, builds equity slower payment, increases may affect budget. |
|
| Adjustable Rate Mortgage (ARM) | ||
|---|---|---|
| Advantages: | Disadvantages: | |
Lower starting rate than 30-year fixed, great for refinancing from a higher rate when you plan a move in 5-7 years. They can be used where unpredictable interest rates make fixed rate loans difficult to obtain. The borrower benefits if interest rates fall. |
Loan balance due can change long term financial planning if borrower stays beyond the ARM period. Borrower may also experience increased notes if interest rates rise during the adjustable years of the loan. |
|
Common Questions
The following may help in answering some of your questions.
- Which program is best for me?
Determining how long you plan to live in the home is a key factor in choosing among programs. If building equity is not a concern, consider a lower interest program such as the balloon or ARM. If you plan to be there beyond 7 years, locking in a fixed rate may be the best choice for you. Your mortgage consultant can go over the details of each program with you.
- What is debt-to-income ratio and how is it calculated?
Debt-to-income ratio is a calculation used to help lenders determine whether you are shopping for a home within your price range. Higher ratios can lead to higher interest rates, so keeping this ratio low is beneficial when applying for a new loan.
Debt is calculated by adding the following monthly payments:
- Minimum monthly credit card payment (not the balance, but the minimum payment due)
- Car note
- Student loan repayment
- Any other outstanding loan payments
- Alimony/Child support payments
- And finally, the expected mortgage, including escrow and insurance, on the home you are considering
This sum should be divided by your gross monthly income. The result should be a number less than .36, or 36%. Ideally, the mortgage payment alone should not exceed .28, or 28%, of your monthly income. This is help homeowners be prepared should a new car purchase or other large loan need to be taken out anytime during the period of the mortgage loan.
Debt-to-income ratios above 36% will be reviewed on a case-by-case basis by your mortgage consultant.
- When I decide I might want to buy a house, what is my first step?
- Before you get your heart set on a particular home, speak with a mortgage consultant to determine where you stand financially. A free credit report and personal analysis will be provided. Some homeowners learn there is some cleanup work to be done on their credit reports in order to increase their scores for a better interest rate. Allow plenty of time to position yourself for a smooth closing. You're about to make a 30-year commitment!
Additional Comments
Choosing the right program is a balance between your own financial situation and the current market climate. Sometimes, high rates cause long-term home buyers to consider adjustable rate mortgages in the hopes that rates will come down in 5 to 7 years. Other times, when interest rates are exceedingly low, short-term buyers in the 5 to 7 year range may not want to risk an expected spike in rates before the end of their period. Our mortgage consultants have many years of experience helping home buyers determine the best program after all considerations.
