The United States mortgage financing industry is highly competitive and creative. Lenders have developed myriad financing options to meet the specific needs of virtually all potential borrowers. This section attempts to outline some of the common types of loan programs, and issues to consider, when selecting the most appropriate loan to meet your needs. However, your best bet is to talk with a mortgage specialist.

	•	Rate Environment: The level and direction of rates plays an important role in determining between various loan programs
	•	Risk Tolerance: Your own comfort level with risk, including the absolute amount of debt you incur, as well as the uncertainty of future rate fluctuations, is another important factor to weigh
	•	Time Horizon: Your expected time horizon, including how long you plan to own your home and potential changes in your financial situation, are also important factors to consider

We encourage you to work with a Mortgage Consultant to analyze your financing needs and compare different mortgage programs to find the right one for you.

Loan amounts over $300,700 are also known as non-conforming loans. These loans exceed the loan amounts allowed by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). Down-payment requirements can be as little as 5% up to a loan amount of $350,000 and 10% for loans up to $650,000.

There are literally thousands of different loan types available. We have assembled over 200 of the best loan programs to choose from. Here is a sampling of some of our popular products:

	•	Fixed Rate Loans
	•	Adjustable-Rate Loans (ARMs)
	•	Blended Loans
	•	Government Loans (FHA, VA,)
	•	No Income/No Asset Verification Loans

Fixed Rate Loans

These are loans that maintain the same rate throughout the period of the mortgage. The terms that are currently available are 10, 15, 20, 25, and 30 years. The monthly payment will remain the same for the length of the loan. The last payment that is made will fully amortize (pay-off) the loan.

Adjustable Rate Loans (ARM's)

These are loans that have a rate which can adjust throughout the course of the loan's repayment, depending upon the movement of a specified Index. One example of a commonly use index is the one-year Treasury Bill. ARM programs may initially offer a lower interest rate than a fixed-rate mortgage. This makes them attractive to people who, by taking the lower initial interest rate, qualify for a larger mortgage. People who may benefit by choosing an ARM program are people planning on moving or refinancing within the first 5 years, people with a high probability of increasing their income, and people who need a low initial interest rate in order to qualify for their mortgage.

Before applying for an ARM, be sure to ask about the interest rate caps. Arms typically have 2 'caps', or limits, on how high or low the interest rate can adjust which also effects how high or low the mortgage payment adjusts. One cap sets the most that your interest rate can go up or down during each adjustment period. The other cap sets the most your interest rate can go up or down during the entire life of the loan. Caps of 2% per adjustment and 6% over the life of the loan are extremely common. For example, if your loan starts at 5%, and the per-adjustment cap is 2%, your interest rate for that adjustment period cannot go higher than 7%. You also know that the interest rate cannot go higher than 11% over the life of the loan. You need to take into consideration what your comfort level would be if you were to have to make a mortgage payment at the highest adjustment sometime in the future.

There are several types of ARM products available including a Standard ARM, balloons, negative amortization loans, and buy-downs.

	•	Standard ARM: Available with initial rates that are fixed for 1, 3, 5, 7, or 10 years. When the initial rate period is up, the loan will adjust based on a formula that varies from program to program. The rate caps are typically 2% per adjustment and 6% over the life of the loan.
	•	Balloon: These are available with initial rates that are locked for 5 or 7 years. Whatever the remaining amount that is left on the loan is due in full at the end of the rate period. The Massachusetts Attorney General had outlawed these programs in Massachusetts for several years because of the high incidence of complaints and foreclosures. These loans should be carefully scrutinized, preferably with legal counsel, before choosing a balloon over another type of loan.
	•	Negative Amortization Loans: These loans do not payoff the principal or the full amount of interest that is due. Negative amortization is a loan payment schedule in which the outstanding principal balance goes up rather than down. This loan allows for the lowest possible payment that you can make. These loans should be carefully scrutinized, preferably with legal counsel, to make sure that you understand the pitfalls of a negative amortization loan.
	•	Buy-downs: This program is based on a standard ARM program, but allows for reduced interest payments for the first couple of years. The reduced interest lowers the mortgage payment and may allow someone to qualify for a loan that they otherwise would not have qualified for at the higher rate. The borrower is responsible for paying the difference between the below-market rate of the loan and the initial rate. This can be done with either a lump-sum in escrow, or by paying the required points on the loan.

Blended Loans

These are loans that blend a first and a second mortgage together. This is often done for several reasons, including avoiding private mortgage insurance, avoiding a jumbo interest rate, or to allow for a future additional pay-down of a mortgage (bonus, inheritance, investment sale, etc.).

FHA

These are federally insured loans that offer very flexible underwriting criteria. The maximum loan amounts vary by county. Ask your mortgage consultant for limits in your purchasing area.

Loan Highlights Particularly Appealing For First-Time Homebuyers:

	•	Low down-payment (usually 3% of the FHA appraised value or the purchase price, whichever is less)
	•	No maximum income/earning limitations
	•	FHA insures the loan, at a lower rate than standard private mortgage insurance, for an insurance fee referred to as Up-Front Mortgage Insurance (UFMIP). UFMIP can be paid in full at the loan closing or financed and added to the loan amount.
	•	Fixed rate and ARM loans available
	•	There is no prepayment penalty on FHA loans
	•	Easier qualification requirements

VA

These are federally insured loans that are available to individuals who have served or are currently serving in the armed forces. Qualified veterans can get a loan of up to $203,000. For eligibility information, contact us.

Loan Highlights:

	•	No down-payment required
	•	Qualification guidelines are more flexible than FHA or conventional loans
	•	Fixed rates only

No Income/No Asset Verification Loans

These loans allow a customer to receive a mortgage without verifying their income. Because the income is not verified on these loans, there is more emphasis placed on the credit history and the appraisal of the subject property. There are several different variations including:

	•	Stated Income: The income is stated but not verified. The employment history is usually verified with a letter from an accountant or a copy of a business license.
	•	No Income/No assets: Neither the income nor any assets are stated on the application. This is commonly referred to as a 'no-doc' loan. You must have a superior credit history in order to be considered for this loan.