Loan Programs

Loan Programs
Choosing a Loan Program The right type of mortgage for you depends on many different factors. Conventional and Jumbo Loans Conventional loans are secured by government sponsored entities or GSE’s such as Fannie Mae and Freddie Mac. Fixed Rate Mortgages A loan program where your monthly principal and interest payments never change. Adjustable Rate Mortgages (ARMs) These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home. Introductory Rate ARMs Most adjustable rate loans (ARMs) have a low introductory rate or start rate, some times as much as 5% below the current market rate of a fixed loan. Standard ARMs and the Differences Various types of adjustable rate mortgages. Cost of Funds Index (COFI) This index is used to determine the interest rate for some types of ARMs. London InterBank Offered Rate (LIBOR) This index is used to determine the interest rate for some types of ARMs. Balloon Mortgages Balloon loans are short term mortgages that have some features of a fixed rate mortgage. Interest Only Loans “Interest only” products are an easy way to save money and a very popular alternative to traditional fixed rates but they are not without risk. An “Interest Only” loan can offer consumers greater purchasing power, increased cash flow and a number of other benefits which are listed later in this article. Graduated Payment Mortgages (GPMs) The GPM is an alternative to the conventional adjustable rate mortgage, and has a fixed note rate and payment schedule. Interest Rate Buydowns The most common buy down is the 2-1 buy down. In the past, for a buyer to secure a 2-1 buy down they would pay 3 points above current market points in order to pay a below market interest rate during the first two years of the loan. At the end of the two years they would then pay the old market rate for the remaining term. Reverse Mortgages A reverse mortgage is a special type of loan made to older homeowners to enable them to convert the equity in their home into cash.