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Loan Types - An Introduction
The Fixed Rate Mortgage remains the most popular, though perhaps overutilized loan in America.
The total principal and interest payment (P&I) does not change during the life of the loan. With each payment, the
principal portion of the payment increases, thereby decreasing the interest portion and the loan balance.
- Terms from 10 to 30 years.
- Fully amortizing, or available with a Balloon feature at
the end of 5 or 7 years for a rate BETTER than the 30 year fixed rate. But, the remaining
balance is due earlier!
- Conventional Conforming loans available to $417,000,
Non-conforming loans available to $1 million.
- FHA loans available with low down payments.
- VA for Veterans only, No Down Payment required.
The Adjustable Rate Mortgage has gained in popularity over the last decade as home buyers have become more sophisticated and
knowledgeable in home finance.
Adjustable Rate loans are fully amortizing, but are re-amortized
after each rate change, for the remaining term.
- Offered as a 30 year loan.
- Conventional Conforming loans available to $417,000.
Non-Conforming loans available to $1 million. Generally
offered with maximum changes of 2% per year and 6% over the life of the loan.
- FHA loans available with low down payments, and rate
changes limited to 1% per year and 5% over the life of the loan.
The rate on an adjustable rate loan changes annually. The change is based on a financial index, usually 1-Year
Treasury Bills plus a spread or margin to come up with the adjusted rate. The new rate
generally cannot be 2% more or less than the current rate on the loan. The 2% is
considered the periodic cap. Over the life of the loan, the rate generally cannot exceed
the initial, first-year rate by more than 6%. The 6% is referred to as the lifetime cap.
We offer a loan that is a blend of a fixed-rate loan and an adjustable-rate loan. The benefits are a rate
lower than the fixed rate loan, but better rate protection than a 1 year ARM.
We have four to choose from, all featuring
30 year terms and full amortization:
- 3/1 - Fixed for first 3 years, then adjustable annually. GREAT for homeowners
that tend to relocate often.
- 5/1 - Fixed for first 5 years, then adjustable annually. GREAT for young families and
some first-time homeowners who will likely purchase a move-up home within 5 years.
- 7/1 and 10/1 - Fixed for the first 7 or 10 years, then adjustable annually.
GREAT all around loans, given that most homeowners move from a home in the 7 to 10 year
range. The rates are still lower than a 30 year fixed rate loan.
Contact one of our Loan Officers for more information.
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