An Adjustable Rate Mortgage (ARM)

An Adjustable Rate Mortgage (ARM) is a mortgage loan that has the following benefits:

• It has a low starting interest rate in comparison to the 30 & 15 year mortgage loans.
• The low introductory rate is used to calculate the mortgage payment for a specified period of time.
• The interest rate is adjusted periodically based on a pre-selected index.
• The most common program is the One Year Adjustable Mortgage (one Year ARM).
• Should the index rate increase, the borrower should be prepared to handle an increase in their monthly payment .The APR's on variable rate loans are subject to increase but may decrease from year-to-year.
• The interest rate on the one year ARM is adjusted once each year, for 30 years.
• The most commonly used index is the yield on the one-year Treasury Bill. The new interest rate is determined by adding this index to a set margin and is determined by the lender.

15 Year Fixed Rate Mortgage Program

A 15 year fixed mortgage has the following benefits:

• This type of mortgage loan has fixed payments and is repaid by the borrower making 180 equal monthly payments over a period of 15 years. What is appealing about this loan is that the borrower can expect to make the same monthly payment for the entire term of the loan.
• A 15 year mortgage loan is available for conventional, jumbo, FHA and VA Loans. It is a widely accepted program used to finance a residential purchase.

A 30 Year Fixed Rate Mortgage Program

A 30 year fixed mortgage has the following benefits:

• This type of mortgage loan has fixed payments and is repaid by the borrower making 360 equal monthly payments over a period of 30 years. What is appealing about this loan is that the borrower can expect to make the same monthly payment for the entire term of the loan. A 30 year mortgage loan is a widely accepted program used to finance a residential purchase, and is available for conventional, jumbo, FHA and VA loans.

An FHA Mortgage Loan Program

An FHA mortgage loan program is insured by the Federal Housing Administration and is a division of the Department of Housing and Urban Development (HUD).

Here are some of the benefits of the FHA Loan:

• The FHA has a very important role as it decides the underwriting standards for approving applicants. FHA underwriting guidelines are known to be more lenient than conventional (not government insured or guaranteed) underwriting guidelines.
• The FHA makes it easier for borrowers to qualify for a mortgage loan . The FHA allows low down payment requirements and a higher monthly debt allowance.
• The FHA limits the types of loan programs it insures but it will insure the more popular 30 year fixed, 15 year fixed and one year adjustable loan programs.
• The FHA limits borrowers as to the amount that they can borrow using an FHA-insured mortgage.
• The FHA loan limits differ by county, so it is important to contact your local HUD office for specifics.

Jumbo Loan Programs

• The benefits to having a jumbo mortgage is that it is a mortgage loan which is larger than the limits set by Fannie Mae and Freddie Mac . These loans usually carry a higher interest rate to enhance their value and marketability to investors.

VA Loan Programs (Department of Veterans Affairs)

The benefits of the VA loan include the following:

• The VA loan is guaranteed by the Department of Veterans Affairs (DVA).
• A major advantage of using a VA loan is that the borrower can finance the purchase of a property with no-money down.
• The VA loan is restricted to individuals qualified by military service.
• The Department of Veteran Affairs will guarantee the more popular 30 year fixed and 15 year fixed loan programs.
  

  What Is A VA Loan?

  The Veterans Administration (VA) does not make loans. VA guarantees that the lender will be protected against loss in the event of a foreclosure up to a maximum of 25% of the loan amount. A funding fee is paid by the veteran to the Veterans Administration for each loan. VA will guarantee a loan for any eligible veteran to purchase a home provided his income will permit him to make the mortgage payments, his credit history is acceptable and he has enough cash to close the loan without borrowing.

  Advantages of VA Loans

  • No down payment required if the purchase price of the property does not exceed the VA appraisal.
  • The seller may pay any or all of the veteran's costs.
  • Less stringent loan underwriting requirements versus other types of loans.
  • Fully assumable (with qualifying).
  • No prepayment penalty.

  Eligibility Requirements

  To be eligible for a VA loan, the veteran must have served in the Armed Forces of the United States of America for a specified amount of time. The length of service required varies based upon the period of time he or she has served. The veteran should have also been discharged under conditions other than dishonorable.

  • Sept. 16, 1940 to July 25, 1947 - 90 days
  • July 25, 1947 to June 27, 1950 - 181 days
  • June 27, 1950 to Jan. 31, 1955 - 90 days
  • Jan. 31, 1955 to August 5, 1964 - 181 days
  • August 5, 1964 to May 7, 1975 - 90 days
  • May 7, 1975 to Sept. 7, 1980 - 181 days
  • Sept. 7, 1980 to Present - Two years
  • Currently in service - 181 days

  Also eligible are unmarried widows of qualifying veterans whose deaths were service related. There are some exceptions to this schedule. Please contact us to help us make a determination of eligibility.

  VA Loan Programs and Amounts

  The maximum VA loan amount is currently set at $240,000.

  ARM (Adjustable Rate Mortgage) which can fluctuate based on the index (1-year Treasury Bill) and has a 1% annual cap and a 5% lifetime cap.

  GPM (Graduated Payment Mortgage) which allows the borrower to qualify at a lower rate but requires a downpayment and has negative amortization.

  VA Appraisals

  All VA appraisals are done by VA assigned/approved appraisers. A Certificate of Reasonable Value (CRV) is then issued, setting forth VA's estimate of value.

  Eligibility Restoration Criteria

  The assumption of a VA loan leaves the veteran with limited eligibility until the loan is paid off in full as a result of a bonafide sale. Eligibility may then be completely restored and another property purchased using full entitlement.

  Co-Mortgagors

  If a veteran is legally married, VA will consider the spouse's income. If the veteran is to be married and the spouse's income is being used to qualify, VA will approve the loan with a marriage certificate as a condition for closing. All other co-mortgagors must meet the following requirements:

  1. Both must be veterans.
  2. Both will occupy the property.
  3. Both will use their entitlements.
  4. Both must qualify for 1/2 of the payment.

  Buyer's Costs

  • NO DOWN PAYMENT REQUIRED
  • Loan Origination Fee (1% of loan amount)
  • VA Funding Fee (varies and can be 100% financed)
  • Credit Report
  • Appraisal Fee
  • ALTA. Lenders Title Insurance Policy
  • Property Tax Proration and Reserves
  • Hazard Insurance and Reserves
  • Interest on new loan, based on closing date
  • Recording Fees

  Seller's Costs

  • Sellers' and Buyers' Escrow Fees
  • Revenue Tax Stamps
  • Standard Owner's Title Insurance Policy
  • Sub-Escrow Fee
  • Pay Off Existing Trust Deed and Liens
  • Proration of Property Taxes
  • Payment of assessments, etc.
  • Structural Pest Control Inspection and Repairs
  • Other repairs or the cost of repairs
  • Broker fees
  • Association Transfer Fees
  • Buyers' Loan Processing Fee
  • Buyers' Loan Document Fee

  And Don't Forget...

  In a VA sale, the seller may pay any or all of the Veteran's costs listed above. This means that the veteran could buy with absolutely no money out of pocket. UNDER NO CIRCUMSTANCES CAN THE VETERAN PAY ANY OF THE SELLER'S COSTS. VA does not set interest rates, so VA rates reflect market conditions like any other type of loan. Discount points need not be charged to anyone, but the discount points to obtain a lower market interest rate can be paid by either the seller or the buyer.

Balloon Mortgage Programs

The 5/7 balloon mortgage is a balloon mortgage loan that has a short term that is generally 5 or 7 years.

• The monthly payment is computed using a 30 year term.
• The borrower will make the monthly payment for the scheduled loan term of 5 or 7 years.
• At the end of this loan term, the borrower is then required to pay off the remaining balance in one lump-sum payment.
• When the loan term is over, the borrower has the option to refinance the mortgage with a new loan.

Another kind of balloon mortgage is the 7/23 balloon mortgage.

• The 7/23 balloon mortgage gives the borrower the option to convert to a fixed rate program for a nominal fee after the initial term of 7 years is over.
• If the conversion feature is used, the interest rate for the remaining term of the loan (23 years) will be adjusted once to reflect market conditions, then remain fixed for the remainder of the loan term.