Definitions of Loan Products

Best for people who:

• Prefer regular payments with no surprises
• Are on limited or fixed incomes
• Plan to stay in their homes a long time
• Are purchasing or refinancing at a time when interest rates are comparatively low

Adjustable Rate Mortgages (ARMs) are simply long-term mortgages having periodic interest rate adjustments which allow flexibility in the monthly loan payments. ARMs are fully amortizing loans and can be structured to fit just about any need or budget. In general, ARMs come in fixed rate periods of 3, 5, 7 and 10 years before becoming adjustable each year. ARMs start out like a fixed-rate mortgage. You have an initial period in which the interest rate and your monthly payment remain the same. After that, however, the rate and your monthly payment can go up or down, according to an index such as the Treasury rate or LIBOR.

Best for people who:

• Need extra borrowing power
• Want to save money in the first few years
• Plan to move or refinance in a few years
• Are purchasing or refinancing at a time when interest rates are comparatively high

Balloon Mortgages are good short-term vehicles that allow interim financing and are most popular in seller financing situations. Balloon loans provide a level payment feature but do not fully amortize over the original term. After the initial loan term, a significant balance remains which is usually paid in full or refinanced. Most balloons have a term of 5 to 7 years. This type of loan program is popular with many sellers that may "carry back" a portion of the equity between the sales price and new loan amount in the form of a second mortgage usually having a 3 to 5 year "call" or maturity. Some times, these seller-financed second mortgages are interest only loans with no principal payment due until the balloon becomes due. Some savvy buyers take advantage of this mechanism to acquire property with little or no money down from sellers willing to finance the purchase.

Best for people who:

• Plan to sell or refinance their homes before the loan expires
• Expect to come into money by the time the balloon is due
• Relocate periodically

Interest-Only Mortgages offer reduced monthly payments, because your monthly payment consists of interest alone. This increases your cash flow - making homeownership more affordable. With the extra cash, you could redirect your cash flow to supplement your savings or investment funds, maximize your contributions to 401k or other tax-deferred retirement accounts, or pay off any higher-cost, non-tax-deductible debt. For those who want to pay down the principal balance by paying more than the stated payment, you are welcome to, but are not required to do so.

Best for people who:

• Are very focused on money management
• Want to reduce their monthly mortgage payment
• Do not intend to be in their homes more than a few years

FHA Mortgages help low-to-moderate-income homebuyers purchase homes with low down payments (approximately 3%) and flexible qualifying guidelines. These loans are insured by the Federal Housing Administration (FHA), which sets loan limits that vary by area. With an FHA mortgage, you can use a gift or unsecured loan for down payment and closing costs. FHA mortgages are available in fixed-rate and adjustable-rate mortgage options. Also, these loans are usually assumable (at the stated interest rate) by the next owner when you sell your home. This is seen as a strong benefit in certain rate environments.

Best for people who:

• Have limited savings and/or moderate incomes
• Are first-time homebuyers and are concerned about not having enough funds for down payment and closing costs on a new home

VA Mortgages offer the opportunity to buy a home up to a specified amount with no down payment if you are a qualified veteran. The Department of Veterans Affairs administers these loans, which are assumable and have more flexible qualification requirements with regard to credit and income than either FHA or conventional (not government insured) home loans. VA loans are available in fixed-rate mortgage options.

Best for people who are:

• Qualified veterans, reservists, active servicemen and women and their spouses (check with your regional VA office to see if you are eligible)
• Eligible borrowers who have limited funds for down payment and closing costs

Construction Loans are short-term loans that provide funds for the construction of the borrower's home. In many cases, permanent financing is arranged to pay off the construction loan once construction is completed. Construction loans are generally interest only during the construction period. To begin the process, the borrower is provided a cost estimate from the contractor with certain disclosures explaining the home-buyer's rights under a construction contract, as well as periodic information regarding construction progress and funds needed. When the contractor is in need of funds, a draw request will be submitted to the bank. The bank will continue to advance funds as construction progresses. When the house is complete and all funds for the construction loan are advanced, the construction lender has a final inspection of the house to confirm that the home was built to the original specifications. After approval from the lender, the loan will be refinanced into a permanent mortgage.

Best for people who are:

• Building homes and need construction financing
• Renovating or rehabbing existing structures

The Combination 1st & 2nd Mortgage is a way to purchase your home with a minimal down payment, without having to pay private mortgage insurance (PMI). The borrower obtains a first mortgage of up to 80% of the cost of the home purchase, while a second mortgage of up to 15% is put in place at the same time, thus resulting in 95% of the total cost of the home purchase. In addition to removing the PMI requirement, the additional interest that is paid on the second mortgage could be tax-deductible. The Combination 1st & 2nd Mortgage can also be used to avoid paying higher jumbo interest rates by having a first mortgage below the conforming loan maximum of $322,700.

Best for:

• First-time homebuyers who have not accumulated a 20% down payment.
• Move-up buyers with high-yielding investments who would rather use a home equity loan as a down payment instead of liquidating their assets.
• People not wishing to delay the purchase of a home due to the untimely receipt of a bonus, commission check or inheritance funds which would otherwise be used as the down payment.