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FREE Financing Checklist



Analyze the Numbers

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First review the mortgage loan types available for home financing. Depending on your qualifying criteria, some of the loan types can be tailored to meet your financing objectives.

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Mortgage Loan Types:

Fixed Rate Mortgages

Fixed-Rate Conventional Mortgages are the Easiest

mortgage loan for home buyers to understand. Commonly referred as the 30-Yr and 15-Yr mortgage loans, these loans have fixed interest rates and repayment amounts — the amounts never change.

more information at our mortgage lending center

(links to our mortgage unit at www.PickMyMortgage.com)

advantages
  • interest rate and monthly payment amounts are fixed for the life of the loan
  • homeowners can budget how much they need each month for the mortgage payment
  • homeowners like the stability of a product
  • homeowners can easily understand how the product works
disadvantages
  • interest rates are slightly higher than ARMs and other special mortgages
  • the average homeowner does not remain in the home for the full 30 years, thus paying more financing charges than with other mortgage loans

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Mortgage Loan Types:

Adjustable Rate Mortgages

ARMs Have Significantly Lower Interest Rates

than conventional fixed rate loans. ARM's adjust their rates up or down during a given period. This means that your monthly payment may go up or down during your repayment term.

more information at our mortgage lending center

(links to our mortgage unit at www.PickMyMortgage.com)

advantages
  • the big advantage of ARMs is the interest rate — which can be significantly lower than 30-year fixed
  • many consumers select the ARMs when they know they will only remain in the home for three of fewer years
  • homeowners use the ARM when they need to qualify for larger loan amounts
  • ARMs are generally assumable which is a plus when homeowners plan to sell in the near future
  • ARMs rates can decrease in declining interest rate markets making your loan payment even less
  • some ARMs have a convertible feature that allows the borrower to convert the ARM to a fixed-rate mortgage
disadvantages
  • the interest rate can fluctuate which makes it hard to budget your finances
  • in rising interest rate markets, your monthly payment can increase significantly
  • some ARMs allow for negative amortization — where caps prevent recovery of the full cost of the loan
  • convertible features can be expensive and may charge a higher interest rate than current prevailing rates

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Mortgage Loan Types:

Fixed Combo ARMs

Fixed Combo Loans are a Combination of Fixed Rate and ARM.

These ARMs attach a delayed adjustment period during which the initial period is fixed. Adjustable Terms hybrids start out at fixed rates loans, adjusting to ARM after a set period of years.

more information at our mortgage lending center

(links to our mortgage unit at www.PickMyMortgage.com)

advantages
  • gives the homeowner a lower rate than fixed-rate loans plus lower risk that the 1-year ARMs
  • many consumers select the Hybrids when they know they will be in the home for a select period of time
  • homeowners use the Hybrid to lower their rate and to qualify for larger loan amounts
  • Hybrids and ARMs that are generally assumable which is a plus when homeowners plan to sell in the near future
  • ARMs rates can decrease in declining interest rate markets reducing your loan payment
disadvantages
  • hybrid rates are typically higher than 1-yr ARMs
  • rates will adjust at the end of the initial period that could raise your payment
  • interest rates will adjust annually after the initial period making it hard to plan your finances
  • in rising interest rate markets, your monthly payment can increase significantly after the initial fixed-rate period

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Mortgage Loan Types:

Interest Only Mortgages

You Pay Interest-Only Payments on Your Mortgage Loan

for the first five or seven years of your 30-yr amortized loan. No principal payment is being made. The amount you payoff when you refinance is the amount you borrowed upon closing.

more information at our mortgage lending center

(links to our mortgage unit at www.PickMyMortgage.com)

advantages
  • you pay interest-only payments on your mortgage loan for the first five or seven years of your 30-yr amortized loan.
  • lower monthly payments.
  • you can afford your first home or a higher priced home by using interest-only loans.
  • your monthly savings can be used to pay the principal or other debts.
disadvantages
  • no principal being paid during the interest-only period.
  • if home values decline, you could lose money.
  • once the interest-only payment term expires (usually in 5-7 years), your monthly payment will increase substantially.

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Mortgage Loan Types:

Low Graduated Payment Plans

Minimum Monthly Payment Plans are Designed

for homeowners who are looking to pay lower initial payments at the start with the expectation to refinance their mortgage later on. The minimum repayment plan usually expires after an initial period.

more information at our mortgage lending center

(links to our mortgage unit at www.PickMyMortgage.com)

advantages
  • generally the lowest monthly payments plans available in the market.
  • designed for homeowners in higher-priced markets.
  • your monthly savings can be used to pay the principal or other debts.
disadvantages
  • potential negative amortization that increases your total borrowed amount.
  • once your initial period ends, your payments may increase 3-4 times.

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Mortgage Loan Types:

Low Down Mortgages

Lending Institutions and Government Sponsored Agencies

have structured several mortgage programs to help first-time home buyers. Generally these loan programs require less than 20% down payment — and in some case zero % down.

more information at our mortgage lending center

(links to our mortgage unit at www.PickMyMortgage.com)

advantages
  • first-time homeowners select these products when they want to get into their homes early without waiting to raise the 20% down payment
  • these programs benefit all types of homeowners — those with investments, good credit, moderate income, etc.
disadvantages
  • many of these loan programs limit the amount that you can borrow
  • many of these programs require PMI insurance, which can add to the total monthly cost

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Mortgage Loan Types:

Balloon Mortgages

Many lenders offer 3- and 5- and 7-year balloon periods with attractive low interest rates.

A Balloon Mortgage means that your monthly payments are based on any fixed term up to 30 or 15 years amortization. At the end of the balloon period, your remaining mortgage loan amount will come due.

Balloon mortgages are popular with people whose income is prone to fluctuate or who are not planning to stay in their home for more than 3, 5 or 7 years. It offers the security of a Fixed Rate Mortgage but at a lower rate.

more information at our mortgage lending center

(links to our mortgage unit at www.PickMyMortgage.com)

advantages
  • they are looking for a diversify way to finance their loan than the traditional fixed and ARM mortgages
  • they expect their incomes to rise significantly in later years — so they are looking for a smaller monthly payment at first with expectation to afford larger payments in later years
  • they are financing a large home purchase that requires nontraditional financing
  • their needs require special financing

    many of these programs assist home buyers in special circumstances
disadvantages
  • many of the Hybrid ARMs offer similar rates and terms
  • there is risk of losing value if market conditions change
  • these loans are less familiar than traditional loans and may confuse homeowners on loan management

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