<
Go Back
A Menu of Home Loan Programs
Information for Sellers
by Lisa Epstein
When you are ready to refinance or purchase a new home, it is crucial to take the time to discuss your currect financial situation, your long and short-term goals for the new property; and a realistic outlook for your short and long-term financial situation. Then, armed with your credit score, salary, liquid assets, and job history, your mortgage professional will be able to offer education about the best loan programs that you qualify for that will help you achieve your goals. Here is a basic menu of loan programs:
Traditional Adjustable Rate Mortgage
The traditional adjustable rate mortgage is a program that is amortized over 30 years and offers an interest rate that periodically adjusts according to an "index" such as the LIBOR. This program will typically offer the lowest initial interest rate available in the marketplace.
Hybrid Adjustable Rate Mortgage
A hybrid adjustable rate mortgage has an initial fixed rate, usually for a 2 or 3-year period, after which time the loan converts to an adjustable rate mortgage. This is often called a 2/28 or 3/27 loan program. This program is commonly used to offer low payments that are guaranteed for a specific, short, period of time.
Interest Only Adjustable Rate Mortgage
An interest only adjustable rate mortgage features a monthly payment that is applied to the interest portion of the loan, freeing up the amount that would typically go towards paying the principal for other uses. This program will typically offer the lowest monthly payment available in the marketplace. This program is especially advantageous to borrowers who are interested in optimizing their monthly cash flow.
Fixed Rate Mortgage
A fixed rate mortgage is a program that is amortized over 15 or 30 years and offers a fixed interest rate and payment for the life of the loan. This program offers peace of mind for those who plan on keeping the loan for 10 or more years.
Pay-Option Arm Mortgage
The PayOption ARM is a “deferred interest option” mortgage. The PayOption ARM gives the borrower up to 4 payment options to select from when making their monthly mortgage payments. With the PayOption ARM, you can defer interest at any given month when making a payment that is less than the Interest Only Payment. When interest is deferred, the amount of the unpaid interest is added to the principal balance.
If you don't have 20% of the purchase price to use as a down payment on your new home, 100% financing is available; however, qualifying is more difficult and credit score requirements are more stringent. Additionally, interest rates are generally higher due to the greater level of risk to the lender. With 100% financing, the balance is usually divided into an 80% first trust deed and a 20% second trust deed. This practice eliminates the need for costly mortgage insurance. Programs for the 20% 2nd trust deed are:
Home Equity Line of Credit (HELOC)
A home equity line of credit is a variable rate loan that is tied to the prime rate as posted in the Wall Street Journal. This program generally offers the lowest interest rate available and allows you the freedom to pay as little as the interest portion of the payment each month. In addition, as you pay down the balance of the HELOC you accumulate available credit that can be used as needed in the future.
Home Equity Installment Loan
A home equity installment loan is a fixed rate loan where the interest rate and payment remain the same for the life of the loan. This program offers a guaranteed payment for as long as you have the loan.
|
