Your Guide to Home Financing That Builds Wealth

Areas of Interest

Loan Options

Summary of Conventional and Jumbo Loan Options…

Fixed Rates
30 year, 20 year, 15 year, and 10 year for the clients that will keep the property forever.

Hybrids
3 year, 5 year, 7 year, 10 year fixed loan products that convert to a 1 year adjustable after the fixed term. Pro’s – Lower rate and payment than a 30 year or 15 year fixed loan and can match how long the borrower may keep the property.

Adjustable Rates (As of August of 2015, most lenders don’t offer these)
1 Month, 3 Month, 6 Month and 1 Year Arm’s
Details – Short term financing solution and great cash flow but uncertainty in future.

Loan Options in More Detail…

30 Year Fixed
This mortgage is fixed for the entire 30 year term of the loan. This is the most conservative mortgage available
providing absolute rate stability, but most likely a substantially higher rate than ARM’s or hybrids; such as the five year or three year mortgages.

15 Year Fixed
This jumbo mortgage is fixed for the entire 15 year term of the loan. This is the most conservative mortgage available providing absolute rate stability, but most likely a substantially higher rate than ARM’s or hybrids such as the five year or three year mortgages. This loan provides a substantially higher payment than the 30 year fixed but pays off in half the time. Significantly less interest will be paid over time; However, securing a 30 year fixed and investing the payment differential elsewhere where (e.g. Stock or Ira) it might be a wiser investment decision (see your financial adviser).

10 Year ARM Hybrid
This mortgage is fixed at the initial rate for ten years. After the 120th month the loan will adjust each adjustment
period to the lower of: 1) the current index plus the margin, 2) the previous rate plus the periodic cap, or 3) the life time cap. Depending on the recommended product for the day, this mortgage may have a first time adjustment higher than the periodic cap. This is a fully amortizing loan with a term of 30 years. The loan does not have a prepayment penalty and does not have negative amortization.

7 Year ARM Hybrid
This mortgage is fixed at the initial rate for seven years. After the 84th month the loan will adjust each adjustment period to the lower of: 1) the current index plus the margin, 2) the previous rate plus the periodic cap, or 3) the life time cap. Depending on the recommended product for the day, this mortgage may have a first time adjustment higher than the periodic cap. This is a fully amortizing loan with a term of 30 years.

5 Year ARM Hybrid
This mortgage is fixed at the initial rate for five years. After the 60th month the loan will adjust each adjustment
period to the lower of: 1) the current index plus the margin, 2) the previous rate plus the periodic cap, or 3) the life time cap. Depending on the recommended product for the day, this mortgage may have a first time adjustment higher than the periodic cap. This is a fully amortizing loan with a term of 30 years.

3 Year ARM Hybrid
This mortgage is fixed at the initial rate for three years. After the 36th month the loan will adjust each adjustment
period to the lower of: 1) the current index plus the margin, 2) the previous rate plus the periodic cap, or 3) the life time cap. Depending on the recommended product for the day, this mortgage may have a first time adjustment higher than the periodic cap. This is a fully amortizing loan with a term of 30 years. The loan usually does not have a prepayment penalty and does not have negative amortization.

1 Year ARM (Includes 1 Year Treasury Bill or Libor)
This mortgage is set at the start rate for one year. Thereafter, it will adjust each 12 months over a 30 year term to
the lower of: 1) the current index plus the margin, 2) the previous rate plus the periodic cap, or 3) the life time cap. This mortgage is a pure adjustable rate mortgage providing the lowest start rate but the greatest interest rate risk. Generally, these mortgages should be secured with as little points as possible. This loan usually does not have a prepayment penalty and usually does not have negative amortization.

Cash Flow Saver, Cost of Funds Index and Monthly Treasury Index ARM’s (No Longer Offered)
Called the “dinosaur” of the adjustable market, the COFI is the slowest moving adjustable index offered. The MTA is also a slow moving index and used by some lenders instead of the COFI. Typically used for purchases or clients trying to keep their mortgage payments as low as possible, these programs will provide the most stable adjustable payments over any other adjustable loan index while providing monthly payment options. Payment options include:

  • Principal and Interest payments over 30 Years
  • Principal and Interest payments over 15 Years
  • Interest Only Payments
  • Minimum or Deferred Interest Payment (Calculated by Lender and can change annually by 7.5% of payment worse case)

How Can One Eliminate Mortgage Insurance when putting less than 20% down?

There are several options available to eliminate mortgage insurance when putting less than 20% down. They include the, following:

  1. LPMI Option at 5% and 10% down when mortgage insurance is built into the rate.
  2. 80/10/10 Option at 10% down where the lender provides and 1st and 2nd Mortgage to Eliminate Mortgage Insurance but also usually increases ones purchase power with a max purchase price of $1.9m as of 12/18/17/19.
  3. VA Financing at 0 Down. If the borrower was honorable or medically discharged from the US Military, they usually have access to VA financing which allows them to purchase at 0 down with no mortgage insurance.

Contact us for more info or for what loan option may be best for you!