Your Mortgage…A Key To Wealth Building

Your Mortgage…A Key To Wealth Building
A mortgage is a loan secured by Real property. When you take out a mortgage you are financing the cost of your home over a set amount of time. The mortgage you choose is a key factor in building your home’s equity. It is here that Predatory Lending takes place. Most consumers are in higher interest rates on their mortgages than they qualify for causing them to loose billions of dollars each year combined Equity. Your FCLS Certified Broker will closely work with you to ensure you are in the best mortgage for your current financial situation, you have received all of your loan options in writing and that there are no excess junk fees charged to you in order complete your home loan transaction.
Loan Programs	Advantages	Disadvantages
Fixed Rate Mortgages
30 year fixed 15 year fixed 40 year due in 30 years	Monthly payments are fixed over the life of the loan Interest rate does not change Protected if rates go up Can refinance if rates go down	Higher interest rate Higher mortgage payments Rate does not drop if interest rates improve
Adjustable Rate Mortgages
10/1 ARM 7/1 ARM (7/23) 5/1 ARM (5/25) 3/1 ARM (3/27) 1 year ARM 6 month ARM 1 month ARM Interest Only (the interest only option can be take out on most mortgages)	Lower initial monthly payment Lower payment over a shorter period of time Rates and payments may go down if rates improve May qualify for higher loan amounts Lower monthly payment	More risk Payments may change over time. Potential for high payments if rates go up No money will go towards the principal keeping the loan balance the same.
Balloon Mortgages
7 year 5 year 40 year due in 30 years	Lower initial monthly payment Lower payment over a shorter period of time Many balloon mortgages offer the option to convert to a new loan after the initial term.	Risk of rates being higher at the end of the initial fixed period Risk of foreclosure if you cannot make balloon payment or if you cannot refinance or if you cannot exercise the conversion option
First Time Buyer Programs
	Lower down payment Easier to qualify Sometimes you may get lower rate	May be subject to income and property value limitations Some programs which have government subsidies may have a recapture tax if you sell the house too early.
Stated Income Programs
	Don’t need to verify income Faster approval	Higher rates Higher Score Needed Limits on Loan Amt.
No point, No fee Programs- THERE IS A COST FOR A “O” POINTS LOAN HIGHER
	Don’t need to verify income Faster approval	Higher rates Higher payments More interest paid over life of loan
Imperfect Credit Programs
	Potential for reestablishing credit if you pay your mortgage on time. When used for debt consolidation, you may be able to reduce your monthly debt payment	Higher rates Terms may not be as favorable Higher rates for long term fixed loans Loans may have prepayment penalties
Home Equity Line of Credit
	You only borrow what you need Pay interest only on what you borrow Flexible access to funds Interest may be tax deductible	Rates can change. The maximum interest rate is normally high. Payments can change on monthly basis You do not pay down the loan for the first 10 years you pay only “interest”, the cost of the loan. Limits financing options on your first mortgage.
Home Equity Fixed Loan
	Fixed payments Interest may be tax deductible	Higher interest rates than on 1st mortgages. Limits financing options on your first mortgage.
Be Cautious Of 1% Loan Programs Option Arm…1% Min Start Rate Loans…Pick A Pay Loans
This loan program is currently one of the most aggressively marketed loan programs by the mortgage industry. Although like all loan programs this program can have its benefits to those who need it and understand it, its ramifications for many is like playing Russian Rolette with their homes. It is important to understand this loan. When you buy a home you have an option to choose a program that allows you to pay principal and interest. Principal pays down your loan and interest is the cost of the loan. If you chose an interest only loan you will pay the interest only which means you pay only the cost of the loan and you do not pay down your loan. If you choose the option arm minimum payment you do not pay down the loan nor do you cover the interest on the loan. You simply pay a low rate and defer the interest on the back of the loan balance. This loan is considered a negative amortization loan If choose the option arm product you will not pay down the amount you borrow from the bank or the cost of the loan which is the interest. By paying a minimum payment of 1% to 2% you are only paying partial interest and differing the rest onto the balance of your home. Caution- Although the payment stays the same the true interest rate behind it can change monthly due to the change in the index associated with the loan An FCLS Certified Broker will provide you with the information you need to understand the ramification of the 1% loan option and/or any other options you may consider.