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| Conventional or Conforming - Loan limit of $417,000 |
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- Most fixed and adjustable rate residential mortgages, in the United States, are underwritten to meet Fannie Mae and Freddie Mac criteria.
- Good Credit (most recent 12 months)
- Stable Income (using Gross Income after Business Expenses)
- Housing Expense as a percent of Gross Income usually around 30%. Can be up to 36% with good credit and special circumstances.
- Housing Expense and other monthly obligations (i.e. - auto payment, student loan, credit cards, etc.) usually as high as 38%. Can be up to 42% with good credit and special circumstances.
- Verifiable liquid financial assets (a.k.a. "Cash Needed for Closing")
- Borrower's own savings
- Gift from relative (Usually 5% down payment must come from borrower's own funds, unless there is a 20% down payment. If there is 20% down "Cash needed for Closing" can all come from gift funds.)
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| Jumbo - Loan amounts from $417,000 to ...? |
- Interest rates are usually slightly higher (1/8 to 1/4%) than that of Conventional Loans.
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| Adjustable Rate Mortgages (ARM's) |
- Most popular ARM products are 1/1, 3/1, 5/1, 7/1, 10/1. Ask about the "Cashflow Option ARM" for greater control of your mortgage payment with four payment options!
- The rate is fixed for the initial one, three, five, seven or ten year
period and then would adjust usually each year thereafter.
- These are only the most common ARM products.
- Important questions to ask include:
- What are the adjustment caps?
- Caps might be stated as 3/2/6 (3% first adjustment, 2% thereafter, but 6% lifetime)
- What is the index and margin on the loan when the rate begins to adjust?
- Index is usually the "One-Year US Treasury Bill"
- Margin is usually 2.75 to 3.00 percentage points above the index
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| Construction / Permanent |
- Used to finance the construction of a new home
- Interest only on outstanding balance during construction phase (which
can last from 4 to 18 months)
- When construction is complete and a "Use & Occupancy Certificate” is issued
by the local municipality, a title update will be performed where
the construction loan is converted to permanent financing.
- Interest rate may or may not be the same during both phases of
construction/permanent loan. This would depend on the loan program you select.
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