Butera Real Estate - Mortgage Information

Types of Financing

Fixed Rate Mortgage

The interest rate stays the same throughout the term of the
loan - usually 15 or 30 years - so the principal interest
portion of your payment remains the same. Payments are
stable but initial rates tend to be higher than adjustable
rate loans and often cannot be assumed by a subsequent
buyer.

Balloon Mortgage

This is a loan which must be paid off after a certain period. The advantage they offer is an interest rate
that is lower than a mortgage that is made for 30 years.

Adjustable-Rate Mortgage (ARM)

The interest rate is linked to a financial index, such as a Treasury security or a cost of funds - so your
monthly payments can vary up or down over the life of the loan - usually 25 to 30 years. Interest rates can
change monthly, annually, or every 3 or 5 years. Some ARMs have a cap on the interest rate increase, to
protect the borrower. Other terms relating to adjustable-rate mortgages:

Adjustment period: The length of time between interest rate changes. Example: one year ARM-interest
changes annually.
Cap: The limit on how much an interest rate or monthly payment can change at each adjustment or over
the life of the loan.
Conversion clause: A provision in some loans that enables you to change an ARM to a fixed rate loan,
usually after the first adjustment period. This may require additional fees.
Index: A measure of interest rate changes used to determine changes in the loan's interest rate over the
term of the loan.
Margin: The number of percentage points a lender adds to the index rate to calculate the ARM's interest
rate at each adjustment.

VA Loan

The VA does not lend money, it guarantees a portion of the loan so that lenders who originate the loan
feel comfortable with their risk. Qualified veterans can obtain loans up to $203,000 with no down
payment. VA-guaranteed loans can be combined with second mortgages and are assumable upon
qualifying by any future buyer.

FHA Loan

FHA does not lend money or make a loan; rather, it insures loans. The down payment can be as low as
2.25%. Discount points may be paid by either buyer or seller. FHA charges a 2.25% up front Mortgage
Insurance Premium (or as little as 2% for a first time home buyer) that can be financed in the mortgage
amount or paid in cash (no premium is required for condominiums). The borrower must also pay an
annual Mortgage Insurance Premium or .5% which is collected monthly.

Seller Assisted Second Mortgage

The seller of the house lends the buyer enough to make up the difference between the purchase price
and the down payment plus first-mortgage balance (a commercial lender may also make this kind of
loan). The terms including the interest rate, are based on buyer/seller agreement. It is often a short-term
(5 to 15 year) loan; sometimes "interest only" payments until the term date when the balance is due in
full. A buyer can then refinance the home.

Assumable Mortgage

Buyer "takes over" or assumes the mortgage obligation of the seller (with concurrence of the lender). The
interest rate doesn't change and is sometimes lower than current rates. Often the loan fees are less as
well.

Mortgage Check List

		Copy of your Purchase & Sale Agreement.
		Your present mortgage information.
		Two year history of employment and verification of all income
		sources.
		If self-employed, copies of past two years Federal Income Tax
		Returns.
		Information about your checking, savings and credit card accounts.
		Name, account number and outstanding balance of each of your
		debts.
		Application deposits.
		Information about any assets.
		Information regarding any other assets that will be used as funds to
		close.
		If FHA - Copy of Social Security card and photo ID.
		If VA - Certificate of Eligibility or DD214.
		If Employee Relocation Client - include relocation information and
		copy of offer, promissory note and copy of check on bridge loan.