Loan Programs

A Fixed-Rate Mortgage applies the same interest rate toward monthly loan payments for the life of the loan. Fixed-rate mortgages generally have higher interest rates than ARMs because there is more risk for the lender. For example, a lender can offer a 30-year fixed loan to a homebuyer at a 6% interest rate. The loan will remain at the 6.0% interest rate, even if the market rate rises to 8%. Fixed-Rate Mortgage benefits include:

• No change in monthly principal and interest payments regardless of fluctuations in interest rates.
• More stability may give you "peace-of-mind".

Adjustable Rate Mortgage (ARM) applies an adjustable interest rate toward monthly loan payments. The homebuyer's principal and interest payment will adjust periodically based on fluctuations in the interest rate. For example, a lender could offer a 30-year ARM loan to a homebuyer at an initial 6% interest rate. During an adjustment period for the ARM loan, the market interest rate could rise to 8.0%, resulting in a significantly larger interest payment. Similarly, the market interest rate could decrease to 5.0%, resulting in lower interest payments.

• Initial payments are lower than fixed rate mortgages.
• Easier qualification for higher loan amounts because of lower initial interest rates.
• Interest rate caps limit the maximum interest payment allowed for the loan.
• Lower interest payments if the interest rate drops over time.

Coming up with the necessary down payment for a home loan can be a big hurdle for many would-be home buyers. Fortunately, there are options available including loans that require no money down. These loans generally carry a higher interest rate, but even so, these loans can be very affordable when you factor in today's overall rates.

For self-employed buyers and others who have a difficult time documenting income history, this loan may be for you. Programs exist for up to 100% financing. These loans carry a slightly higher interest rate, but generally speaking, the more information you can document, the lower the interest rate. There are certain liquidity requirements typically associated with this type of program. Even so, it is one of the easiest programs for many buyers today!

The Federal Housing Administration (FHA), offers loans for low-to-moderate-income home buyers. FHA loans have low down payments, which typically run around 3 percent, and have relatively easy requirements. FHA mortgages have no income restrictions and even those with lower credit scores may be considered. Past bankruptcies do not necessarily disqualify borrowers from using this program! In addition, the Department of Veterans Affairs (VA) offers a zero-down mortgage program. To take advantage of this program, borrowers need to be among those listed as veterans and service personnel in the U.S. military. One of the biggest benefits of this program is that it eliminates the need for private mortgage insurance!

A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to the homeowner. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence.