|
|
|
 |
|
|
|
MORTGAGE TYPES
There are a few different factors that will determine what type of mortgage will be right for you.
Our lending staff will be glad to help you sort through the options and choose the mortgage that is best suited to your needs.
Fixed Rate Mortgages
Most people are aware of the fixed rate mortgage. These loans have interest rates that are fixed and present predictable housing costs for the life of the loan. Terms of these loans run from 10 to 30 years. We write our fixed rate loans through the Federal Home Loan Mortgage Corporation, commonly referred to as Freddie Mac: This gives you the opportunity of obtaining the best rates the secondary market has to offer. In addition, you can obtain these loans with a down payment as low as five percent of the purchase price.
Adjustable Rate Mortgages
Commonly called “ARM’S”, the adjustable rate mortgage came about during a period of high interest rates that prevented a lot of people from entering the housing market. The ARM offers a lower initial rate and adjusts periodically, based on certain index rates, thus sharing the interest rate risk between the borrower and the lender. These loans can be excellent choices for buying your home. If interest rates are high, you have expectations of a rising income, or if you plan to own the home for a short period of time, the ARM may be the loan for you.
The ARM has terms not commonly found with fixed rate mortgages. Some of these are:
Initial Interest Rate - The initial rate on an ARM is typically one to two points below fixed rate loans.
Adjustment Interval - The interest rate can adjust every 1, 3, or 5 years, based on which term best suits your particular needs. As your interest rate fluctuates, your payment is automatically adjusted accordingly in order to pay the loan off in the term of the loan.
Index - The rates are tied, or indexed, to certain economic indicators. We tie our rates to the weekly average of the corresponding Treasury Note issues, adjusted to a constant maturity. Thus, the one year ARM adjusts annually to a certain margin above the one year Treasury Bill
Margin - This is the additional amount added to the Index to establish the interest rate. This margin remains constant throughout the term of the loan. Margins typically are 2.5 percent to 3 percent. So, you can see your interest rates follow the changes in the market.
Change Date - This is the scheduled anniversary date of the loan on which your rate and payment amount can change.
Depending on the ARM program you choose, the interest rates can only change a maximum of one to two percent each adjustment interval and have a maximum increase over the term of the loan of six percent over the initial interest rate. Notices are sent out 45 days prior to the scheduled change date to notify you of your principal balance, new interest rate and payment amount.
Balloons
These loans have many of the same features of the ARM with one very important difference. These loans mature every 2 to 3 years. At this time, you have the opportunity to visit with your loan officer to negotiate a new interest rate for the next period. After agreeing upon a new rate, the remaining principal balance is amortized over the remaining term of the loan. An extension agreement is then executed to extend the maturity of the initial mortgage document.
Guaranteed Rural Housing (GRH)
These loans allow you to finance 100% of the purchase of a home and are partially guaranteed by GRH. The program is targeted toward buyers with low to moderate income. Terms of the loan must be 30 years, and you must escrow your taxes and insurance. Certain inspections are required, including structural and pest. Interest rates are competitively priced.
Home Equity Lines of Credit
Our banks offer two types of this account. One account allows you to pay only the interest monthly and is in effect for seven years. The other account requires a payment of 2% of the outstanding principal balance and has a term of ten years. This payment pays interest monthly plus a portion of the principal. The interest rates on both products adjust periodically, depending on the account.
Ask your loan officer for more information on this versatile loan product. You’ll be glad you did.
back to previous page
|
|
|
 |
 |
|
