Mortgage Loans

First-Time Homebuyers Still Seeking Low Rate Home Loans
Sellers are getting the message and cutting their asking price, real estate professionals say. That, along with the recent drop in mortgage interest rates, is encouraging first-time buyers to start applying for mortgage loans again. The home mortgage rate picture "has created some momentum for first-time homebuyers, not to write an offer today, but to start looking again and be serious about moving in January or February," says Phil Sveum, broker-owner of Coldwell Banker Sveum, REALTORS®, in Madison, Wis.

A growing number of first-time buyers in Florida's Tampa Bay area are taking advantage of special deals from builders looking to unload newly constructed homes that are bloating their inventories, says Craig Beggins, president of Century 21. Affordability continues to be the biggest problem for many would-be buyers. In the second quarter, buyers had to stretch more than ever before in 25 of the top 50 markets, according to Bank of America analyst Daniel Oppenheim. Even with the recent price declines, he estimates that to make homes as affordable as they have been in the last decade, home prices would have to drop another 7 % in 2007 while incomes rose 4%.

Mortgage Loan Program Options

Fixed Rate Mortgage Products:

30 Year Fixed Rate - the interest rate is fixed for 30 years and the mortgage is fully amortized (or paid off) in 30 years if the normal payment schedule is followed.

20 Year Fixed Rate - the interest rate is fixed for 20 years and the mortgage is fully amortized (or paid off) in 20 years if the normal payment schedule is followed.

15 Year Fixed Rate - the interest rate is fixed for 15 years and the loan is fully amortized (or paid off) in 15 years if the normal payment schedule is followed.

10 Year Fixed Rate - the interest rate is fixed for 10 years and the loan is fully amortized (or paid off) in 10 years if the normal payment schedule is followed.

10 Year Fixed Rate - see intermediate ARM's

7 Year Fixed Rate - see intermediate ARM's

5 Year Fixed Rate - see intermediate ARM's

3 Year Fixed Rate - see intermediate ARM's

Fixed Rate Balloon Mortgage Products:

7/23 Conforming Mortgage - the rate is fixed for a period of 7 years and then converts to a new fixed rate for the remaining 23 years. The new rate is typically based on the Fannie Mae net yield index and is added to a pre-determined margin. Note that converting to this new rate is permitted only if the prescribed conditions are met and if not, then the loan is due and payable to the lender as a balloon loan (review your loan documents carefully). The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed.

5/25 Conforming Mortgage - the rate is fixed for a period of 5 years and then converts to a new fixed rate for the remaining 25 years. The new rate is typically based on the Fannie Mae net yield index and is added to a pre-determined margin. Note that converting to this new rate is permitted only if the prescribed conditions are met and if not, then the loan is due and payable to the lender as a balloon loan (review your loan documents carefully). The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed.

30/15 (30 due in 15) - the rate is fixed for a 15 years and the payment is amortized over 30 years to provide for a lower monthly payment. This loan is due and payable as a balloon loan at the end of 15 years.

Intermediate ARM's:

10/1 ARM - the rate is fixed for a period of 10 years after which in the 11th year the loan becomes an adjustable rate. The adjustable is tied to the 1-year treasury index and is added to a pre-determined margin (usually between 2.25-3.0%) to arrive at your new monthly rate. Ask what the margin, life cap and periodic caps of your ARM will be in the 11th year. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

7/1 ARM - the rate is fixed for a period of 7 years after which in the 8th year the loan becomes an adjustable rate. The adjustable is tied to the 1-year treasury index and is added to a pre-determined margin (usually between 2.25-3.0%) to arrive at your new monthly rate. Ask what the margin, life cap and periodic caps of your ARM will be in the 8th year. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

5/1 ARM - the rate is fixed for a period of 5 years after which in the 6th year the loan becomes an adjustable rate. The adjustable is tied to the 1-year treasury index and is added to a pre-determined margin (usually between 2.25-3.0%) to arrive at your new monthly rate. Ask what the margin, life cap and periodic caps of your ARM will be in the 6th year. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

3/1 ARM - the rate is fixed for a period of 3 years after which in the 4th year the loan becomes an adjustable rate. The adjustable is tied to the 1-year treasury index and is added to a pre-determined margin (usually between 2.25-3.0%) to arrive at your new monthly rate. Ask what the margin, life cap and periodic caps of your ARM will be in the 4h year. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

Traditional ARM's:

1 Year Treasury ARM (1 YR T-Bill) - the rate is fixed for 1 year (this initial rate is sometimes referred to as the teaser or start rate) after which in the 2nd year the rate will adjust based on the 1-year treasury index which is added to a pre-determined margin (typically ranging from 2.25-3.00%) to arrive at the new annual rate. Ask what the margin, life cap and periodic payment caps of your ARM will be. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

1 Year Treasury Average ARM - the rate is fixed for 1 year (this initial rate is sometimes referred to as the teaser or start rate) after which in the 2nd year the rate will adjust based on the 1-year treasury average index which is added to a pre-determined margin (typically ranging between 2.25-3.00%) to arrive at the new annual rate. Ask what the margin, life cap and periodic payment caps of your ARM will be. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

Monthly Treasury Average ARM (MTA) - the rate is fixed for a 3 month period (this initial rate is sometimes referred to as the teaser or start rate) after which your rate is based on the monthly treasury average index which is added to a pre-determined margin (typically ranging between 2.25-3.00%) to arrive at the new monthly rate. This loan may also have periodic payment caps as well as interest rate caps, and therefore could have the potential for negative amortization. Ask what the margin, life cap and periodic caps of your ARM will be. (Also see anatomy of an ARM for additional information).

COFI ARM (Cost of Funds) - the rate is fixed for a 3 month period (this initial rate is sometimes referred to as the teaser or start rate) after which your rate is based on the 11th district cost of funds index (COFI) which is added to a pre-determined margin (typically ranging between 2.25-3.00%) to arrive at the new monthly rate. This loan may also have periodic payment caps and therefore the potential for negative amortization. Ask what the margin, life cap and periodic caps of your ARM will be. (Also see anatomy of an ARM for additional information).

6 Month CD ARM - the rate is fixed for 6 months (this initial rate is sometimes referred to as the teaser or start rate) after which in the 7th month the rate will adjust based on the 6-month CD index which is added to a pre-determined margin (typically ranging from 2.25-3.00%) to arrive at the new semi-annual rate. Ask what the margin, life cap and periodic payment caps of your ARM will be. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

LIBOR ARM (London Interbank Offer Rate) - the rate is fixed for 6 months (this initial rate is sometimes referred to as the teaser or start rate) after which in the 7th month the rate will adjust based on the 6-month LIBOR index which is added to a pre-determined margin (typically ranging from 2.25-3.00%) to arrive at the new semi-annual rate. Ask what the margin, life cap and periodic payment caps of your ARM will be. The loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed. (Also see anatomy of an ARM for additional information).

New Adjustable Rate Mortgage

Option ARM - 1 Month Option Adjustable Rate Mortgage

Second Mortgages:

30 Year Fixed Rate - the interest rate is fixed for 30 years and the loan is fully amortized (or paid off) in 30 years if the normal payment schedule is followed.

15 Year Fixed Rate - the interest rate is fixed for 15 years and the loan is fully amortized (or paid off) in 15 years if the normal payment schedule is followed.

Equity Lines:

Prime Rate - an equity line of credit with a loan term ranging from 15 to 25 years. The rate is based on the prevailing prime rate, which is added to a fixed margin (typically ranging from 0 to 4%) depending upon a borrower's individual credit and equity. The line of credit offers check-writing privileges and interest is paid only on the funds drawn from the account. A draw period exists from which a borrower may access the funds after which the repayment period begins so that the equity line is fully paid at the end of the term.