Residential Loan Programs

There are several loan programs offered today. The characteristics of each loan program are unique, so consult your mortgage broker for more information about the loan programs available to you. To help determine the best loan program for you, consider the following:

• How important is payment certainty? If knowing that your payment will be the same every month is important, consider a fixed-rate mortgage.
• How important is rapid equity buildup? If rapid equity buildup is a factor, consider a shorter amortization period, such as a 15-year, fixed-rate mortgage.
• Do you anticipate increasing or stable income? If income growth is anticipated, you could take advantage of a lower start rate on an ARM or a temporary buydown.
• Other factors to consider include:
  • ability to qualify at market rates for loan amount selected
  • anticipated term of occupancy
  • possibility of significant rate changes
  • existence of up-front costs

Loan Programs	Characteristics
15- and 30-Year Fixed-Rate Mortgages	Interest rate does not change. Principal and interest (P & I) does not change. Fixed-rate mortgages fully amortize over a defined period of time and are paid in-full at the end of the loan term. Different loan terms are available (15- and 30-year terms are most popular). The shorter the term, the faster equity is built and the loan is paid off.
Fixed-Rate Balloons	P & I payment and interest rate do not change. Regular monthly P & I payments are based on 30-year amortization, while the unpaid balance (balloon) is due at the end of a shorter, predetermined term, typically 5, 7 or 10 years. Interest rate is typically less than fixed-rate loans. Most borrowers anticipate refinancing or selling prior to the end of the balloon term.
Fixed-Rate with Temporary Buydown	Borrowers or the seller may pay to temporarily “buy down,” or lower, the interest rate. Decreased interest rate reduces the monthly payment. Lower interest rate may help borrowers qualify more easily; qualifying factors may vary. Interest rate/payment is typically reduced for 1, 2 or 3 years
Interest-Only Mortgages	There are no reductions to the principal amount. There is no provision for negative amortization. Payments may increase up to an amortized amount, but the loan balance itself does not increase. Generally, interest-only payments are limited to the first 5, 10 or 15 years of the loan. After that, the loan is amortized for the remainder of its term
Adjustable-Rate Mortgages (ARMs)	There is potential for the interest rate/ payment to fluctuate. ARMs transfer to borrowers a portion of the risk associated with a changing economy. In exchange for sharing the risk, ARMs offer borrowers initial interest rates that are substantially lower than fixed-rate mortgages. The lower interest rate may help borrowers qualify more easily; qualifying factors may vary.