Fixed-Rate
Mortgage Products (for 1st mortgages only)
Monthly principal and interest payments do not change over the
term of the loan, which means your mortgage expenses are easily
anticipated. If you believe interest rates are going to increase,
this may be the best option for you.
Adjustable
Rate Mortgage (ARM) Products
The interest rate on this loan will be fixed for a stated period
of time and will then become adjustable for the remainder of the
loan. For example, a 5-year fixed (30 year) loan would have a
fixed interest rate for the first five years and then convert
to an adjustable rate for the remaining 25 years.
This
adjustment is based on changes in a pre-selected index, and will
take place according to a pre-defined schedule (generally every
six months or every year). Your interest rate and monthly payment
will fluctuate based on changes in your index. The most common
indices are the Treasury Bill, Certificate of Deposit (CD), LIBOR
and COFI.
Adjustable
rate loans have more risk due to the possibility that the interest
rate could increase. However, because you are assuming additional
risk, the lender will generally reward you with a lower interest
rate and monthly payment during the initial fixed interest period.
These loans are of particular benefit to borrowers that plan to
either sell the property or refinance before reaching the adjustable
period.
Stated
Income Mortgage Products
In qualifying for these products, the lender will not require
you to provide standard explanations of your income, such as tax
returns. This means that there is no verification of your income,
but you must state the source of your income. Individuals likely
to be interested in a stated income loan are typically self-employed
or individuals who write-off a large portion of their income such
as contractors, waiters & waitresses.
Home
Equity Line of Credit (HELOC)
A home equity line of credit is a form of revolving credit in
which your home serves as collateral. Think of it as a credit
card that is secured by the equity in your home. Many homeowners
use these credit lines for major items such as debt consolidation,
travel expenses and home improvements.
Home Equity Loan (also known as
a “second”)
A home equity loan enables you to borrow money in a lump sum against
the equity (the value of your home minus what you owe) you have
built up in your home. This loan is subordinate to the existing
first mortgage. Buyers commonly use a second mortgage to keep
their first mortgage in the conforming range (which keeps the
rate lower) and to avoid PMI. Home equity loans are often used
to pay off credit card debt, buy a car or to make major renovations
to a home.
Interest
Only Loan
This loan is exactly what it sounds like. All payments cover interest
costs only and no principal is paid off at all. This type of payment
schedule can be utilized on Fixed Mortgages, ARM’s, HELOC’s
and Seconds. Most borrowers who use this type of payment schedule
do so to lower the monthly mortgage payment. Many borrowers who
have seasonal type jobs or get large year-end bonuses often opt
for this type of program and then pay money towards the principal
during the time of the year they so choose. Many investors use
this type of loan if they plan on keeping the property for short-term
and believe they will experience very high appreciation on their
investment.
NINA
(No Income No Asset) Verification Loans
This loan type is very similar to a stated loan. The main difference
is that both income and assets are not verified. This loan type
will increase a borrower’s rate, but if he/she cannot verify
his/her assets or income, this is a viable product for that individual.
