However,
the interest rate changes at specified intervals (for example, every
year) depending on changing market conditions; if interest rates go
up, your monthly mortgage payment will go up, too. However, if rates
go down, your mortgage payment will drop also.
A few options are available to fit your individual needs and your
risk tolerance with the various market instruments.
ARMs
with different indexes are available for both purchases and refinances.
Choosing an ARM with an index that reacts quickly lets you take full
advantage of falling interest rates. An index that lags behind the
market lets you take advantage of lower rates after market rates have
started to adjust upward.
The interest
rate and monthly payment can change based on adjustments to the
index rate.
6-Month
Treasury Average ARM
Has a maximum interest rate adjustment of 1% every six months. The
Treasury Average index generally reacts more slowly in fluctuating
markets so adjustments in the ARM interest rate will lag behind
some other market indicators.
12-Month
Treasury Average ARM
Has a maximum interest rate adjustment of 2% every 12 months. The
treasury Average index generally reacts more slowly in fluctuating
markets so adjustments in the ARM interest rate will lag behind
some other market indicators.
Balloons
Balloons can be fixed-rate or adjustable-rate loans with one larger
payment (usually the last one) that pays the balance of the loan.
On a 5/25 balloon, for example, payments are amortized over 30 years
so payments are low, but the unpaid balance is due in 5 years.
5/25 and
7/23
Max. Housing Ratio = 29%
Max. Debt Ratio = 41%
Max. LTV Ratio = 90%
Two-Step/Reset
The rate adjusts only once during the 30-year term. For the initial
period, (5 or 7 years), the rate is fixed at the quoted rate. After
the initial period, it adjusts to a new rate by adding a specified
margin to an index. The new rate remains fixed for the 23 or 25 remaining
years. The loan is fully amortized over 30 years. Temporary buydowns
are permitted to lower initial interest rate.
5/25
and 7/23
Max. Housing Ratio = 29%
Max. Debt Ratio = 41%
Max. LTV Ratio = 95%
Jumbo Loans - For the year 2002: Single-family, one-unit dwellings
loans that exceed $300,700 / multiple-unit financing that exceeds
$578,150 for four-family properties. (Jumbo loans are also called
non-conforming loans.)
Fixed-Rate
Jumbo
6-month Jumbo LIBOR ARM
1-Year Jumbo ARM
3/1, 5/1, 7/1, 10/1 Jumbo ARMs - 15-, 20- and 30- year terms. Interest
is fixed for the first respective number of years, then adjusts
annually thereafter for the life of the loan.
Max. LTV Ratio = 95% except for ARMS which = 90%
Refinancing
Refinancing pays off your existing loan with a new loan. Borrower’s
usually refinance to lower their existing interest rate and/or to
take cash out.
Fixed-rate
and ARMs programs including cash-out refinancing
Max. Housing Ratio = 29%
Max. Debt Ratio = 41%
Max. LTV Ratio = 75% for cash-out (exceptions up to 80%), sub-prime
loans = 90%
Max. LTV Ratio = 95% for no cash-out owner-occupied. 90% for ARMs
Max. LTV Ratio = 70% for investments and 80-90% on second homes
On owner-occupied
and second home purchases with subordinate financing (a second mortgage),
the first mortgage cannot represent more than 75% of the lesser
of the sales price or appraised value.
Condos
& Town homes
Lending is based on the unit's marketability. The development project
must be FNMA or FHLMC accepted or have lender warranties. In addition,
the project cannot have heavier investor concentration (non-owner-occupied
units) than a certain percentage of the total-usually approximately
40% for established projects and 30% for new developments.
Fixed-rate
and ARMs
Max. Housing Ratio =33%
Max. Debt Ratio = 41%
Max. LTV Ratio = 95% if owner-occupied, usually 80% for second homes
Max. LTV Ratio for ARM = 90%
Debt
Consolidation/Home Equity Loans
If you need to borrow money, our home equity lines may be one useful
source of credit. Initially at least, which may provide you with
large amounts of cash at relatively low interest rates. Interest
paid on home equity loan may also provide you with certain tax advantages
unavailable with other kinds of loans. (Check with your tax advisor
for details.)
Second
Mortgages
We also offer second mortgage installment loans. Although second
mortgage plan also place an additional mortgage on your home, second
mortgage money usually is loaned in a lump sum, rather than in a
series of advances made available by writing checks on an account.
Also, second mortgages usually have fixed interest rates and fixed
payment amounts. Interest paid on second mortgage may also provide
you with certain tax advantages unavailable with other kinds of
loans. (Check with your tax advisor for details.)
Government
Loans
These are fixed-rate loans initially created by the Community Redevelopment
Act to allow more people to qualify for and afford home financing.
They require little or no cash reserves and small down payments that
can be borrowed, depending upon the program. Homeowner education is
required for some programs.
Fannie
Mae (FNMA) Flex 97 Loan and Community Homebuyer Program
Max. Housing
Ratio = 33%
Max. Debt Ratio = 36-41%, depending on program
Max. LTV Ratio = 97%
Community
Homebuyer
No cash reserves are required. Homebuyer education is required on
topics, such as energy efficiency and home maintenance.
Flex
97% loan
Two months of PITI reserves may be required for closing. Gifts, grants,
loans from family, government or non-profits and asset-secured loans
are acceptable for down payment and closing costs.
Freddie
Mac (FHLMC) Affordable Housing Programs
Freddie
Mac Alt 97 and Affordable Gold 97 Plus. Gifts, grants and secured
or unsecured loans are acceptable for down payment and closing costs.
Max.
Housing Ratio = 33%
Max. Debt Ratio =41% and higher with compensating factors.
Max. LTV Ratio = 97%
Affordable
Gold 97 Plus requires 2 months PITI reserves and homebuyer education.
Standard mortgage insurance coverage is required.
ALT 97 requires
no reserves and less mortgage insurance coverage, but requires up-front
fee of 2 points. Homebuyer counseling is not required.
VA Loans
These loans are often made without any down payment at all, and
frequently offer lower interest rates than ordinarily available
with other kinds of loans. Aside from the veteran's certificate
of eligibility and the VA-assigned appraisal, the application process
is not much different than any other type of mortgage loan. And
if the lender is approved for automatic processing, as more and
more lenders are now, a buyer's loan can be processed and closed
by the lender without waiting for VA's approval of the credit application.
Additionally, if the lender is approved under VA's Lender Appraisal
Processing Program (LAPP), the lender may review the appraisal completed
by a VA-assigned appraiser and close the loan on the basis of that
review. The LAPP process can further speed the time to loan closing
.
