Loan Programs  

3/1 Adjustable Rate Mortgage (ARM)

This type of loan has monthly payments that are based on a 30 year repayment schedule and the interest rate remains fixed for the first 36 months (three years). After that time the interest rate (and, therefore, the monthly payments) may change every 12 months (one year). This is referred to as the "adjustment period". The new rate is based upon fluctuations in an index (typically the One Year Treasury Security) and is calculated by adding a specified amount to the index. The amount that is added to the index is called the "margin" (typically 2.50% - 3.00%).

For example, if the index equals 5.0% at the time of adjustment and the margin equals 2.75%, the new interest rate would be 7.75%. However, this type of loan program usually has limits on how much the interest rate can change (either up or down) at each adjustment date, compared with the interest rate being charged before the new adjustment is made. Typically, this limit is 2% and is referred to as an "adjustment cap".

There is also a limit as to how much the interest rate can change (either up or down) from the initial interest rate over the entire life of the loan (typically 6%) and this is referred to as a "lifetime cap". The monthly payment changes, as needed, at each adjustment period, to reflect the adjusted rate.

This type of loan is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first 60 months (five years) as opposed to the first 36 months. After that time the interest rate (and, therefore, the monthly payments) may change every 12 months (one year). As with a 3/1 ARM, the index is typically the One Year Treasury Security index, the margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

7/1 Adjustable Rate Mortgage (ARM)

This type of loan is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first 84 months (seven years) as opposed to the first 36 months. After that time the interest rate (and, therefore, the monthly payments) may change every 12 months (one year). As with a 3/1 ARM and a 5/1 ARM, the index is typically the One Year Treasury Security index, the margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

15 Year Fixed Rate Loan

This type of loan is the same as the 30 year fixed rate loan except the life of the loan is 180 months as opposed to 360 months. Since the loan is being paid faster than either the 30 year fixed rate loan or the 20 year fixed rate loan, monthly payments for this type loan are higher than the other two loans.

Generally, the longer a lender agrees to keep the interest rate "fixed", the greater the risk to the lender, therefore, in most instances, interest rates on 15 year fixed rate loans are slightly lower than on 20 or 30 year fixed rate loans.

20 Year Fixed Rate Loan

This type of loan is the same as the 30 year fixed rate loan except the life of the loan is 240 months as opposed to 360 months. Since the loan is being paid slightly faster than the 30 year fixed rate loan, monthly payments for this type loan are higher than the 30 year fixed rate loan.

This type of loan has 360 monthly payments that remain the same for the entire 30 year period after which time the loan is paid in full. The monthly payment is based on an interest rate which does not change over the term of the loan (hence the term "fixed rate").

B/C Credit Loan

These types of loans are available to borrowers who have or have had credit problems such as being late on or defaulting on the repayment of loans or credit cards. Although such loans are available as fixed rate or adjustable rate mortgage loans, the interest rate and/or costs associated with such loans are generally higher than loans available to borrowers who do not have a history of credit issues to reflect the fact that the risk associated with such loans is generally higher. Borrowers who do not have a history of credit issues are said to have "A" credit. Those with a history of credit issues are said to have "B" credit or "C" credit depending on the severity of the credit issues.

Blended Loans  80/20

Since fixed rate conforming loans (see definition above) generally have lower interest rates than fixed rate jumbo loans , some lenders offer borrowers seeking to borrow more than the conforming loan amount, a loan that allows the borrower to take advantage of the lower fixed interest rate of a conforming loan on a portion of their loan that does not exceed the conforming loan limit.

This feature is then blended together with a variable interest rate feature on that portion of the loan amount that exceeds the conforming loan limit. For example, if the conforming loan limit is $359,650 a consumer looking for a fixed rate loan of more than $359,650 can obtain a conforming fixed interest rate on the first $359,65 of their loan provided they are willing to have a variable interest rate on that portion of their loan that exceeds $359,650. The variable interest rate portion is often similar to a home equity loan which is typically tied to the interest rate known as the "prime rate".

COFI - Option ARM

(Cost Of Funds Index)

This COFI based Adjustable Rate Mortgage offers the borrower several payment options.  These options include a minimum payment and a principal and interest payment that is adjusted monthly.  Under certain conditions the borrower may be offered an interest only payment option.

The interest rate on the loan is the sum of the COFI  index plus a margin.  The margin will not change throughout the term of the loan.  The index value will be adjusted monthly, which will cause the interest rate to be adjusted monthly.

The minimum payment option is adjusted annually with a payment cap adjustment of 7.5% of the prior years payment.  Every five years the payment cap is suspended in order to insure that the loan will be paid off at the end of the loan term.  Because the interest rate will be adjusted monthly, the minimum payment may or may not cover the amount of interest being charged.  If the minimum payment does not cover the amount of interest being charged, paying the minimum will result in negative amortization.  This simply means that the balance on your loan will increase in the amount of the difference between the minimum payment and the interest charge on the loan that month.

The principal and interest payment option is available every month.  Since the interest rate is adjusted monthly, this payment is adjusted accordingly.  This payment option will pay the loan off based on a 30 year amortization.

The interest only option is not available every month.  This option is only available when the minimum payment does not cover all of the interest charge that month.

COSI LOAN

(Cost Of Savings Index)

• The most stable adjustable rate index in America.

• The COSI mortgage offers the best bi-weekly payment feature in the business. This bi-weekly feature will automatically pay off a 30-year loan in just 23 years, saving tens of thousands of dollars, as an end result. One half of the payment will be directly withdrawn from a pre-determined bank account every 14 days.

• The COSI loan does not require escrow accounts for taxes and insurance. This will result in a lower overall cash requirement at closing. Many tax municipalities also will provide you discounts for prompt payment on property taxes. Lenders will not usually pay your taxes by any offered discount date.

• The COSI mortgage offers the most liberal conversion feature in the marketplace.

• The COSI ARM has a low annual payment cap of 7.5%, lower than any T-Bill ARM.

• The COSI Loan offers maximum flexibility. Like a visa card the COSI mortgage offers multiple payment options. You can pay the low start up payment, an interest only payment, a fully indexed payment or a 15-year term payment. A standard fixed rate mortgage is more like an American Express Card no flexibility make your payment in full every month to keep your card.

Conforming Loan

A loan in which the amount borrowed is less than or equal to

• 1-unit = $417,000

• 2-units = $533,850

• 3-units = $645,300

• 4-units = $801,950

Maximum loan amounts for Alaska and Hawaii are as follows:

• 1-unit = $625,500

• 2-units = $800,775

• 3-units = $967,950

• 4-units = $1,202,925

Construction Loan

This type of loan is typically used to finance the construction of a home. It may or may not also include the purchase of the land upon which the home is to be built. Unlike a typical mortgage loan where the entire amount of the loan is disbursed to the borrower at the time the loan transaction is consummated, a construction loan typically involves a series of disbursements which are linked to a construction schedule. Some construction loans have fixed interest rates, others have variable interest rates.

In addition, some construction loans automatically convert to a regular mortgage (referred to as "permanent" financing) once construction has been completed, while others require another loan transaction to take place so the borrower can payoff the construction loan and obtain permanent financing.

First-Time Homebuyer Loan

A loan is considered a 1st time homebuyer loan when it has one or more features that are available only to 1st time homebuyers. For example, a lender may reduce its interest rate (typically by one eighth to one quarter of one percent), reduce or eliminate its closing costs and, if an adjustable rate mortgage, reduce its margin (typically by one quarter of one percent). Such a loan may also have less stringent loan qualification guidelines.

Government Loan  (FHA/VA Loans)

This type of loan is guaranteed by a federal agency such as the Veterans Administration or the Federal Housing Administration or by a State agency such as a State housing authority. As a result, such loans are typically offered at reduced interest rates and have less stringent loan qualification guidelines. Such loans, however, are generally targeted to a specific group of people and contain income, purchase price or other eligibility requirements.

Interest Only Loan

Jumbo Loan

A loan in which the amount borrowed is greater than $359,650

Land Loan/Lot Loan

While the typical mortgage loan involves both a structure and the land upon which the structure is built, this type of loan involves only land on which a structure has yet to be built.

No Asset Verification Loan

This type of loan is similar to a No Income Verification Loan except it is used by borrowers who do not wish to or are unable to verify their assets as opposed to verifying their income. As with No Income Verification loans, the interest rate and/or costs may be slightly higher than normal to reflect the higher degree of risk involved in loaning to borrowers without verifying their assets. Here, such risk is often offset to some degree by borrowers who have significant verifiable incomes or who are only borrowing a small percentage of a property's value.

No Income/No Asset Verification Loan

This type of loan is similar to a No Income Verification Loan and a No Asset Verification Loan except it is used by borrowers who do not wish to or are unable to verify their income and their assets. Once again, the interest rate and/or costs for such loans may be slightly higher than normal to reflect the higher degree of risk involved in loaning to borrowers without verifying their income or assets. Such risk is often offset, to some degree, by borrowers who have a significant history of paying loans of a similar type as the one being sought or who are borrowing only a small percentage of a property's value.

No Income Verification Loan

These types of loans are available to borrowers who, for one reason or another, do not wish to or are unable to verify their annual income. An example of such borrowers includes those who obtain revenue from sources they do not wish to divulge or those that receive all or a portion of their income in cash.

While available from some lenders as fixed or adjustable rate loans, the interest rate and/or costs may be slightly higher than normal to reflect the higher degree of risk involved in loaning to borrowers whose incomes have not been verified. Such risk is often offset to some degree by borrowers who have significant verifiable assets or who are borrowing only a small percentage of a property's value.

MTA - Option ARM

(Monthly Treasury Average)

This MTA (Monthly Treasury Average) based Adjustable Rate Mortgage offers the borrower several payment options.  These options include a minimum payment and a principal and interest payment that is adjusted monthly.  Under certain conditions the borrower may be offered an interest only payment option.

The interest rate on the loan is the sum of the MTA  index plus a margin.  The margin will not change throughout the term of the loan.  The index value will be adjusted monthly, which will cause the interest rate to be adjusted monthly.

The minimum payment option is adjusted annually with a payment cap adjustment of 7.5% of the prior years payment.  Every five years the payment cap is suspended in order to insure that the loan will be paid off at the end of the loan term.  Because the interest rate will be adjusted monthly, the minimum payment may or may not cover the amount of interest being charged.  If the minimum payment does not cover the amount of interest being charged, paying the minimum will result in negative amortization.  This simply means that the balance on your loan will increase in the amount of the difference between the minimum payment and the interest charge on the loan that month.

The principal and interest payment option is available every month.  Since the interest rate is adjusted monthly, this payment is adjusted accordingly.  This payment option will pay the loan off based on a 30 year amortization.

The interest only option is not available every month.  This option is only available when the minimum payment does not cover all of the interest charge that month.

Second Home Loan

This type of loan is used to purchase or refinance a property other than a borrower's principal residence. In most instances, such a property is a borrower's vacation home (or "second home"). Provided that the property is not strictly an investment property, the interest rate and costs charged on such loans will generally be the same as those available on loans used to purchase or refinance a borrower's principal residence.

Reverse Mortgage

This type of loan enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. Below are some common questions asked by consumers about reverse mortgages.

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