Perhaps you've heard that there are over 200 loan programs. The bad news is this is true. The good news is this is true. Bad news because you could easily get lost in trying to understand them all. Good in that a good diversified lender can get loans for individuals who would be turned down by traditional sources such as banks and credit unions.

Is all this difficult to understand? Well, sorry but . . . yes & no. We'll let you judge for yourself.

There are only 4 basic mortgage types: 1) Fixed rates , 2) Balloons , 3) ARM's , and 4) GPM's . If you understand the basic premise for these four loan types you can eventually piece the rest of it together. If you keep in mind the following information the explanation of the loan types may make more sense to you.

The variables: payment, interest rate , term , and loan amount. Remember one very important thing - when one variable changes it will impact only one other variable. A couple of examples:

1)If the interest rate goes up on an ARM the payment increases, but the term remains the same.
2)If you make additional principle payments the term will be reduced (you pay off the loan earlier), but the required payment remains the same.

A mortgage payment has 6 potential variables: 1) Principle , 2) Interest , 3) Term (how many years), 4) Insurance (hazard/homeowners), 5) Property tax, and 6) M.I. (mortgage insurance) don't confuse this with hazard insurance. The industry acronym that sums this up is PITI (principle, interest, tax, and insurance).

FIXED RATE MORTGAGES:

The interest rate is fixed and will not change even if the loan is sold to another lender. The term may be for 30, 20, 15, or 10 years. They have no call features - a call feature makes the loan due before the full amortization period . Fixed rate mortgages are the most frequently used loan programs. Bi-weekly mortgages are also fixed rate mortgages.

BALLOON MORTGAGES:

The term balloon comes from a "balloon" payment (the balance of the loan amount) due at the end of a certain period. Balloon loans come in 2, 3, 5, 7, and 10 year periods. There are primarily 3 types of balloon loans.

1) A true balloon loan. This means the loan is due in full at the end of the balloon period. If the loan is not paid off in that period the mortgage is in default (ouch!)

2) A reset balloon. The loan at the end of the balloon period is reset to a fixed rate mortgage. The two impacting variables are the interest rate and the payment. The new interest rate will be the published 60 day rate at that time plus an additional 3/8% to 5/8% margin. If you close on a 7/23 year balloon/reset (fixed for 7 years then interest is reset for the final 23 years) in April 1997, then in April of 2004 your new rate would be what the rates are at that time plus the margin.

3) A balloon that converts to a 1 year ARM. The rate is fixed for 7 years then the loan in year 8 converts to an adjustable rate mortgage. For information on the pros and cons of the different balloon types please contact us.

ADJUSTABLE RATE MORTGAGES:

Adjustable rate mortgages consist of 4 primary and key elements.

Start rate: ARM start rates are almost always artificially low - somewhat like teaser rates.

Index: The index is the item that moves in the interest rate equation. The most popular indexes for ARM's are the T-Bill, LIBOR, Prime rate, COFI (11th District Cost of Funds Index).

Margin: The margin is an amount that is stipulated in your mortgage note. The margin remains the same throughout the loanÃs life and is added to the index to equal the fully indexed rate.

Cap rates: In the early 1980's when ARM's were introduced there were no cap rates. Many borrowers who had a relatively pleasant start rate of 8.5% lost their homes when interest rates soared into the high teens and prime rate went as high as 20.5%. There are 2 cap rates: an annual cap rate, and a lifetime cap rate. For example the T-Bill ARM characteristically has 2/6 caps. This means the interest rate on the loan could increase or decrease by a maximum of 2% on the loan's anniversary, but never to exceed 6% higher or lower than the original start rate - for the life of the loan.

GPM's - GRADUATED PAYMENT MORTGAGES:

GPM's have not been popular in the last few years. The GPM is actually a fixed rate mortgage with some peculiar twists. The key concept is yield. The payments are lower to start. Then each year the payment increases at a specific amount (usually 7% payment increase not interest rate). This Graduating payment usually transpires over a 5 year period at which time the payment stays fixed for the remaining life of the loan. During the first 5 years this loan reduces principle at a slower rate than any of the other loans. Then in the remaining 25 years it makes up for it. The net result is the yield (revenue generated) is the same for the lender as it would've been on a normal fixed rate mortgage.

If you've found that this section made perfect sense please call, we would like to talk with you about working for us!

SPECIAL PROGRAMS:

The mortgage industry has been very dynamic the last 16 years. ARM loans have been introduced and have evolved. Balloon loans have also evolved to address additional market needs, but the most dramatic developments have been in the NON-CONVENTIONAL lending arena.

The development of non-conventional loans has enabled a tremendous volume of loans to be approved that previously would have been turned down. What are these loans?

NIQ - NO INCOME QUALIFIER or LIMITED DOC: Either income is stated but not verified, or income is not disclosed at all, or income can be verified by bank statements only! WOW! A person can actually qualify when his or her tax returns show a loss!

B through D PAPER: Our underwriters call these "loans for the credit challenged borrower". Recent bankruptcy, NOD (notice of default), in foreclosure, etc.

100% OF PURCHASE LOAN: Yes, you can actually buy a home with zero, goose egg, nada, zilch, nothing down!

ONE CLOSE CONSTRUCTION TO PERM: Save closing costs over the traditional closing a construction loan then closing a regular mortgage at the completion of the house. Also this has the added benefit of paying a mortgage interest rate on a construction loan and locking the rate in now. Most of these programs even have a one time interest rate roll down if interest rates have gone down!

MODEL HOME LOANS: These are loans for the benefit of the builder who has model homes on his or her project.

LOT LOANS: Find a lot you want, but aren't ready to build yet? Lot loans to 75% of purchase.

ETC. ETC. ETC. Yes, there is more, but this will do for now. Please contact us !