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").
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 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.
This type of loan has fixed monthly payments for the term of the loan (five years)
that are based on a 30 year repayment schedule. At the end of the five year term,
the outstanding principal balance of the loan is due plus any unpaid interest.
This loan program generally has a refinance option at the end of the five
year period that gives the borrower the option to extend the loan at a fixed
rate for the remaining 25 years. The new interest rate is based upon fluctuations
in an index (typically the fixed interest rate offered at that time by the Federal
National Mortgage Association (60 day mandatory yield rate) and is calculated
by adding a specified amount to the index (typically .625% - 1.25%). For example,
if the index equals 7.0% at the time of the extension of the loan and the margin
is 1.00%, the new interest rate would be 8.00%.
In order to exercise this option, there are usually several conditions that
must be met such as: (1) the borrower must still be the owner/occupant of the
property, and (2) the borrower must be current in making monthly payments and
can not have been more than 30 days late on any of the last 12 monthly payments
made prior to the time the option is exercised. In addition, the option may
not be available if interest rates have risen by more than 5.00% over the initial
rate.
This type of loan is similar to the 5 Year Balloon loan except for the fact that
the term of the loan is 7 years as opposed to 5 years and the refinance option
at the end of the term is for an additional 23 years as opposed to 25 years. As
with the 5 Year Balloon loan, the index is typically the fixed interest rate offered
at that time by the Federal National Mortgage Association (60 day mandatory yield
rate) and is calculated by adding a specified amount to the index (typically .625%
- 1.25%). Also, as with the 5 Year Balloon, loan, the borrower must meet specified
conditions to be able to take advantage of the loan extension option and the interest
rate must not have risen by more than 5.00% over the initial rate.
Some lenders offer loan programs that provide borrowers the opportunity to obtain
an approval for their loan before they select a property to purchase. Generally,
such pre-approvals are subject only to a satisfactory appraisal of the property
ultimately selected by the borrower. A pre-approval should not be confused with
a pre-qualification, which is an unverified analysis of a borrower's ability to
qualify for a loan and is subject to verification of a borrower's income, a borrower's
assets and a satisfactory appraisal of the property selected for purchase.
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 (typicaly by one quarter of one percent). Such a loan may also have less
stringent loan qualification guidelines.
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 60 months (five years). After
that time, the interest rate (and, therefore, the monthly payments) may change
once for the remaining 25 years of the loan. The new interest rate is based upon
fluctuations in an index (typically the fixed interest rate offered at that time
by the Federal National Mortgage Association (60 day mandatory yield rate) and
is calculated by adding a specified amount to the index. The amount that is added
to the index is called the "margin" (typically .625% - 1.25%). For example, if
the index equals 5.0% at the time of adjustment, and the margin equals 1.0%, the
new interest rate would be 6.0%. However, this type of loan program usually has
limits on how much the interest rate can increase or decrease at the time of the
interest rate adjustment. Typically, the interest rate cannot increase more than
6% from the initial interest rate nor decrease more than 1.5% from the initial
rate.
This type of loan is similar to the 5/25 Two Step Mortgage except for the fact
that the monthly payments remain fixed for the first 84 months (seven years) as
opposed to five years and after that time the interest rate may change once for
the remaining 23 years of the loan. As with a 5/25 Two Step Mortgage, the index
is typically the fixed interest rate offered at that time by the Federal National
Mortgage Association (60 day mandatory yield rate), the margin is typically .625%
-1.25% and the interest rate cannot increase more than 6% from the initial interest
rate nor decrease more than 1.5% from the initial rate.
This type of loan program is based on an interest rate (actual rate) that does
not change over the term of the loan and has fixed monthly payments that are based
on a 30 year repayment schedule. However, the monthly payments that are made during
the first 36 months (three years) are calculated based on an interest rate that
is less than the actual rate. The first 12 monthly payments of the loan are calculated
based on an interest rate that is 3% less than the actual rate. For the second
year of the loan, payments 13 through 24 are based on an interest rate that is
2% less than the actual rate of the loan. For the third year of the loan, payments
25 through 36 are based on an interest rate that is 1% less than the actual rate.
After the third year, the monthly payments to be made over the remaining 27 years
of the loan are based on the actual rate.
This type of loan is typically used to help borrowers who are unable to qualify
for a loan at current interest rates. By "buying down" the interest rate, the
borrower decreases the initial monthly payments that are required to be made
which increases the borrower's ability to qualify for the loan. The cost of
"buying down" an interest rate for a period of time is generally determined
by calculating the difference between (a) the total monthly payments that would
have been made during the buydown period if the loan did not have a buydown
feature and (b) the total monthly payments to be made during this same period
with the buydown feature in place. This amount is generally paid for at time
of closing.
This type of loan is similar to a 3-2-1 Buydown loan, however, the buydown feature
of the loan occurs during the first two years of the loan as opposed to the first
three years. Accordingly, the first 12 monthly payments of the loan are calculated
based on an interest rate that is 2% less than the actual rate and for the second
year of the loan, payments 13 through 24 are calculated based on an interest rate
that is 1% less than the actual interest rate.
This type of loan is similar to a 3-2-1 Buydown loan and a 2-1 Buydown loan however,
the buydown feature of the loan occurs only during the first year of the loan
as opposed to the first two or three years. Accordingly, the first 12 monthly
payments of the loan are calculated based on an interest rate that is 1% less
than the actual rate.
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 $417,000, a consumer looking for a fixed rate loan of more than
$417,000 can obtain a conforming fixed interest rate on the first $417,000 of
their loan provided they are willing to have a variable interest rate on that
portion of their loan that exceeds $417,000. 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".
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.
This type of loan does not have to be paid off by a borrower when the borrower
sells his/her home. Instead, the new buyer of the home may assume the obligation
of the initial buyer to repay the loan in accordance with the terms of the loan.
Generally, most loans are not assumable and some that are, may be subject to the
lender's approval of the new borrower and/or the lender's ability to modify the
terms of the 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.
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.
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.
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.
This type of loan is offered by lenders to borrowers who are relocating their
principal residence to the lender's area. Although such loans have most or all
of the features associated with typical mortgage loans used to purchase a borrower's
principal residence, relocation loans often have flexible loan qualification guidelines
to accommodate situations that arise during a borrower's relocation to another
area. For example, even though a borrower's spouse has not obtained a job in the
area they are moving to, the lender may take all or a portion of the spouse's
former employment income into consideration based on the anticipation of future
employment.
This type of loan is offered by lenders to borrowers who plan to use money from
the sale of their current property to purchase their new property but are moving
into the new property before the sale of their current property takes place. In
such instances, a bridge loan is obtained, (based on and secured by the borrower's
equity in their current property), to "bridge" the time between when the borrower
buys their new property and the time when the borrower sells their current property
At the time of the sale of the current property, the proceeds from such sale are
used to pay off the bridge loan. Typically, bridge loans are for a short period
of time (e.g. 3 - 6 months) and feature adjustable interest rates tied to an index
such as the prime interest rate.
This type of loan refers to an adjustable rate mortgage that contains a feature
which allows a borrower to convert their loan from an adjustable rate mortgage
to a fixed rate mortgage. Such loans generally contain a time period during which
the borrower may exercise his/her option to convert (typically between the 13th
and 60th month of the loan). The new fixed interest rate that the borrower converts
to is based upon fluctuations in an index (typically the fixed interest rate offered
at that time by the Federal National Mortgage Association (60 day mandatory yield
rate) and is calculated by adding a specified amount to the index (typically .625%
- 1.25%). For example, if the index equals 7.0% at the time of conversion and
the margin is 1.0%, the new interest rate would be 8.0%. Some lenders charge borrowers
a fee to exercise their conversion option, however, such fees generally do not
exceed $250.
This type of loan refers to a loan that enables a borrower to "lock in" an interest
rate (generally at the time of submitting a loan application) and obtain a better
interest rate in the event that rates decrease between the time of submitting
the application and the time the loan closing occurs. The initial interest rate
basically "floats down" to the new rate. In many instances, the "floatdown" does
not occur unless the decrease in the interest rate equals or exceeds .375% (3/8
of one percent).
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.
This type of loan is similar to the 7/3 ARM except for the fact that the interest
rate remains fixed for the first 120 months (ten years) as opposed to the first
84 months. After that time, the interest rate may change every 36 months. As with
a 7/3 ARM, the index is typically the Three 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%.
This type of loan is similar to the 3/1 ARM except for the fact that the interest
rate remains fixed for the first 120 months (ten 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, 5/1 ARM and 7/1 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%.
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.
This type of loan refers to a loan that enables a borrower to "lock in" an interest
rate (generally at the time of submitting a loan application) for an extended
period of time. Since most loan programs enable borrowers to lock for 45-60 days,
a loan program that allows for longer periods of time such as 90, 120, or 180
days is considered an extended lock loans.
This type of loan has monthly payments that are based on a 30 year repayment schedule
but the interest rate (and, therefore, the monthly payments) may change every
6 months (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 1% 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 6 month ARM except for the fact that the adjustment
period is every 12 months (one year) as opposed to every 6 months. In addition,
the adjustment cap on a 1 year ARM is typically 2% as opposed to 1%. The lifetime
cap is typically 6%. The index is typically the One Year Treasury Security index
and the margin is typically 2.50% - 3.00%.
This type of loan is also similar to the 6 month ARM except for the fact that
the adjustment period is every 24 months (two years) as opposed to every 6 months.
As with a 1 year ARM, the index is typically the One Year Treasury Security index
and the margin is typically 2.50% - 3.00%. Also, the adjustment cap is typically
6%.
This type of loan (also referred to as a "3/3 ARM") is similar to the 6 month
ARM except for the fact that the adjustment period is every 36 months (three years)
as opposed to every 6 months. The index is typically the Three Year Treasury Security
index. As with a 1 or 2 year ARM, the margin is typically 2.50% - 3.00%, the adjustment
cap is typically 2% and the lifetime cap is typically 6%.
This type of loan (also referred to as a "5/5 ARM") is similar to the 6 month
ARM except for the fact that the adjustment period is every 60 months (five years)
as opposed to every 6 months. The index is typically the Five Year Treasury Security
index. As with a 1 or 2 year ARM, the margin is typically 2.50% - 3.00%, the adjustment
cap is typically 2% and the lifetime cap is typically 6%.
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%.
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%.
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.
Many loan programs are not available to borrowers who are not citizens of the
United States and who do not possess a "green card" from the U.S. Department of
Immigration & Naturalization. Such cards enable a borrower to remain in this
country indefinitely. Loan programs that are available to borrowers who are neither
U.S. citizens or possess a green card, are referred to as "no green card loans".
Information provided by INFOTRAK National Data Services
