Loan Program Descriptions Fixed Rate Loans- 30, 25, 20, 15, or 10 year terms These mortgages have fixed interest rates for the entire term of the loan and therefore, have the same payment from monthly to month until the loan is paid in full. The shorter the amortization term the higher the payment and the lower the rate. A shorter term will also have a greater amount payed toward the principal balance vs. interest each month. Interest Only Payment Loans  With an interest only loan, the borrower pays only the interest that accrues on the loan balance each month. Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment. Technically speaking these loans are not a separate type of loan but rather one of the standard loan programs with a special payment option added. They do ,however, have additional and more restrictive underwriting requirements. 7/1, 5/1, 3/1 LIBOR or Treasury ARM  With an Adjustable Rate Mortagage or ARM, the interest rate and payments are adjusted as frequently as every month. The purpose of the program is to allow mortgage interest rates to fluctuate with market conditions. The rate is fixed for an initial period. For example, a 5/1 ARM has a fixed rate and monthly payment for 5 years before it starts adjusting (up or down) annually. Most choose an ARM loan because it has a lower start rate and payment vs a fixed mortgage. The rate is tied to an index- one can choose from a COFI, LIBOR or Treasury index. Pay Option ARM This loan program is an adjustable rate mortgage with added flexibility of making one of several possible payments on your mortgage every month, in order to better manage your monthly cash flow. It's low introductory start rate allows you to make very low initial mortgage payments and low qualifying rates enable you to qualify for more home. The minimum payment option can help keep your monthly payments affordable. If the minimum monthly payment is not sufficient to pay the monthly interest due, you can always avoid deferred interest by choosing the interest-only payment option. With the Option ARM, you generally have at least two fully amortized payment choices, leading to a quicker loan payoff. If you prefer to pay off your loan on schedule, you can make the fully amortized payment based on a 30-year loan, or you can choose the 15-year payment option for the fastest equity build-up. Pick-a-Payment Loans The Pick-a-Payment loan is a Pay Option ARM but based on a different index- the Cost of Savings (COSI). Each month you choose between the minimum payment (less than interest only), interest only, 30 year amortization or a 15 year amortization. Option ARM loan programs are right for you if you'd like to own your property only for a short time, and prefer affordability and flexibility in your monthly payment. However, if you select the minimum payment option in the early years, you should be prepared for possible sudden increases in your monthly payments thereafter. Subprime, Slow Credit, B/C Credit Loans These loans have expanded credit and income guidelines to help those qualify who do not fall within conventional guidelines. Those factors include hard to document income, those with less than sterling credit or loans with higher loan-to-values. Zero Down Home Loans As the name implies, these loans required no downpayment. They do ,however, have closing costs which can be paid by the borrower, seller or even the lender. 80/20 Combo Loans - No Mortgage Insurance Combo loans are used mainly for those who do not have 20% or greater downpayment. On any loan less than that, mortgage insurance is required. To avoid this monthly payment a borrower can close with 2 loans instead of one. 80/20 or 80/10/10 etc. Jumbo and SuperJumbo Loans A jumbo loan is any loan greater than the maximum conforming loan size limit eligible for purchase by either Fannie Mae or Freddie Mac, who purchase the underlying securities from mortgage originators. Those funds are then reinvested in new mortgages, and the flow-of-funds cycle continues. The conforming loan limit is set every November. The 2005 limit for single-family homes and condominiums (in Minnesota) is $359,650. Investment Property and 2nd Home Loans If you are purchasing a property but will not be living there as your primary residence, you will need one of these loans. Typically they require a higher down payment, have higher rates and fees. Neighborhood Champions Loans The Neighborhood Champions mortgage product helps teachers, police officers, firefighters, healthcare workers and workers in related professions overcome the high cost of home ownership. It features greater flexibility with credit scores and credit histories, no income restrictions and requires little to no down payment.   Copyright © 2004 - 2006 Optimus Home Mortgage