Choosing a Loan Program
The right type of mortgage for you depends on many different factors.
Conventional Loans
Conventional loans are secured by government sponsored entities such as Fannie Mae and Freddie Mac. Conventional loans can be made to purchase or refinance homes, single family to four family homes.
Fixed Rate Mortgages
A loan program where your monthly principal and interest payments never change.
Adjustable Rate Mortgages (ARMs)
These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home.
Introductory Rate ARMs
In certain markets, Adjustable Rate Loans (ARMs) may offer a low introductory rate or start rate. This start rate is for a limited time. As a rule, the lower the start rate is the shorter the time before the loan makes its first adjustment.
Standard ARMs and the Differences
Various types of adjustable rate mortgages.
Cost of Funds Index (COFI)
This index is used to determine the interest rate for some types of ARMs.
London InterBank Offered Rate (LIBOR)
This index is used to determine the interest rate for some types of ARMs.
Interest Only Loans
"Interest only" products are an easy way to save money and a very popular alternative to traditional fixed rates but they are not without risk. An "Interest Only" loan can offer consumers greater purchasing power, increased cash flow and a number of other benefits which are listed later in this article.
Graduated Payment Mortgages (GPMs)
The GPM is an alternative to the conventional adjustable rate mortgage, and has a fixed note rate and payment schedule.
Interest Rate Buydowns
In certain markets, Interest Rate Buydowns may be available. In general Buydowns this is how they work. Payments are reduced and figured on a lower interest rate over a specific term. The difference between the “real” note rate and the lowered interest rate is paid in cash by the seller or the buyer. The more common buydowns are 3-2-1 and 2-1.
Reverse Mortgages
A reverse mortgage is a special type of loan made to older homeowners to enable them to convert the equity in their home into cash.