Choosing the best Mortgage Program

Your current needs are the guidelines to finding the best mortgage program for you. How long will you stay in the home?
Are you comfortable with a flexible mortgage payment?
What is the most important, a low interest rate or minimal closing costs?

A 15-year fixed mortgage will save you thousands of dollars over the life of the loan. However, your monthly payment will be higher.

An ARM (Adjustable Rate Mortgage) may provide a low monthly payment for several months, or years, but you take the risk of your mortgage payment increasing with the fluctuation of the economy.

The best way for you to find the mortgage program is for you to contact the Mortgage Lending Officer.

Let a professional help you with all the options and answers.

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Closing Costs

Mortgage companies charge fees to lend you money. The fee is usually a percentage of the loan amount. One type of fee is called a point. The definition of a point is one percentage point of your loan amount. For example, if you borrow $300,000 and you are charged 1 point, this is equal to $3000.00. Points may be used to "buy down" the interest rate. In order to see if paying a point would be a benefit for you, contact the mortgage lending officer.

Your closing costs consist of an appraisal fee, credit report fee, some type of processing fee or documentation fee. A processing fee should not be greater than $500. If it is, you are probably paying too much. Every mortgage company has some sort of a processing fee, documentation fee, or commitment fee. This fee is simply used to pay for the services the mortgage company provides. Any additional fees listed, or more than 1 type of fee is considered to be "junk fees". These are fees charged above and beyond what is needed to process the mortgage loan.

Additional fees will be your title insurance, title company fees, and recording fees. Most title companies charge a closing fee or settlement statement fee for closing your loan. In addition you will have recording fees from the county you live in. Finally, if you escrow your taxes and insurance, you will need to build your escrow account at time of closing. There is a minimum of a two -month reserve requirement for taxes and insurance. You will also be responsible for providing funds to pay your taxes and insurance. This builds your escrow account enabling your mortgage company to pay your taxes when it is due at year end and your insurance when it is due. It is a good idea to get your closing costs in writing prior to committing to a mortgage company. This will be provided for you in a Good Faith Estimate.

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Conventional loan

A loan that is not insured and/or guaranteed by an agency of the Federal Government. There are several different loan options offered under the conventional loan program. We have a program to fit each individual need.

· Conventional mortgage requires a minimum down payment of 5%.

· Private Mortgage Insurance (PMI) is required on loans with less than 20% down.

You may eliminate PMI if you have an 80% LTV (Loan To Value) : Current mortgage balance divided by estimated market value. This can save you up to $60.00 a month or more!

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Credit Report

There are 3 National Credit Bureau agencies. All three of these credit bureaus are used for approval on your mortgage loan. Make sure you review your credit bureau periodically. There may be someone out there using your name! A creditor may be reporting incorrect information! You have the right, under the Fair Credit Reporting Act, to dispute your credit report. Look into 1 Stop Mortgage.com's entire loan program. You will receive a credit analysis, and tips on how to clear up any discrepancies you may have on your report.

Your credit score is a statistical method of assessing the credit risk of doing business with you. This number rates the likelihood of an individual paying back the lender. This score is based on delinquent credit, delinquencies, current payment history, types of credit, the amount of credit outstanding, the amount of unsecured debt and the number of inquiries.

A credit score of 680 or above is considered an A+ credit score. This type of credit score allows a simple automatic underwriting process and may not require a lot of verification or documentation. This borrower receives the current market interest rate.

A credit score of 680 to 620 will prompt an underwriter to review the file for any potential risks. This borrower may need to provide letters of explanation. This borrower may still take advantage of the current market interest rate. However, depending on the score and other compensating factors, the borrower may be offered a higher interest rate to cover the potential risk of lending.

A credit score below 620 will find a loan product less attractive. The interest rate will be higher and the down payment required for a purchase may be greater. However, these type of loan products are offered and do allow the individual to become a home owner and begin to reestablish a more favorable credit score. This process may take 24 months. It is possible to increase the credit score by making mortgage payments on time while continuing to make timely payments to other creditors.

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Down Payment

There are options in receiving grants for a down payment. There are qualification guidelines. Generally, these grants are available in the amount of 3% of the loan amount, not to exceed $22,500. These programs and the specific eligibility requirements vary. Many of these grants are not required to be paid back. You may research these programs through your community, or visit www.partnersincharity .org, or contact the Mortgage Lending Officer directly.

Assistance is also offered for individuals looking for a low down payment. The assistance differs from grants. The programs are usually income sensitive. This depends on the number of dependents and the amount of net income. This process usually requires a lot of paper work and a little more time in the mortgage process. An education class for home buyers is usually required. It is recommended that you locate a realtor that is familiar in dealing with these type of loans. Please contact the mortgage lending officer for a referral, or simply click on the "Realtors and other Services" (links) button!

The FHA program is a great low down payment program for everyone!

State Housing Authority Illinois Housing Development Authority
401 N. Michigan Avenue / Suite 900 Chicago, IL 60611
(800) 942-8439 or
(312) 836-5200

Missouri Housing Development Commission
3770 Broadway Kansas City, MO 64111
(816) 756-3790

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Equity

The equity of your home is based on the amount you owe versus the market value of your home. For example, if you owe $120,000 and the market value of your home is $250,000, you have 52% equity in your home. While shopping for a mortgage product, you may hear the term loan to value (LTV) used.
This is the percentage of the loan in comparison to the value to your home. Using the above example, your loan to value would be 48% (120,000 / 250,000). The more equity you have in your home, the lower your interest rate may be.

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FHA Loans

The purpose of the FHA (Federal Housing Administration) loan is to promote housing sales by offering a government insured mortgage for people who can not afford the down payment for a conventional mortgage, but they have the income to support the monthly payment. These loans are either insured or guaranteed against loss by an agency of the Federal Government.
· FHA requires a minimum down payment of 3% · FHA requires Mortgage Insurance   (MIP) on all loans regardless of the down payment. You can either include the   initial premium with the mortgage or pay the premium in cash at closing.

Streamline Refinancing for FHA Mortgages

FHA has permitted streamline refinances on insured mortgages since the early 1980's. The streamline refers only to the amount of documentation and underwriting that needs to be performed by the mortgage company, and does not mean that there are no costs involved in the transaction.
The basic requirements of a streamline refinance are:
· The mortgage to be refinanced must already be FHA insured.
· The mortgage to be refinanced should be current (not delinquent).
· The refinance is to result in a lowering of the borrower's monthly principal and   interest payments.
· No cash may be taken out on mortgages refinanced using the streamline refinance   process.

Companies may offer streamline refinances in several ways. Some companies offer "no cost" refinances (actually, no out-of-pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the company pays any closing costs that are incurred on the transaction. Companies may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by an appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed what is currently owed, i.e., closing costs may not be added to the new mortgage with those costs either paid in cash or through the premium rate as described above. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal and, thus, closing costs may not be included in the new mortgage amount.

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Home Equity loan / Home Equity Line of Credit

Also known as second mortgage loans. Second mortgage loans may be offered for 15-20 years. The rate is a floating rate and may fluctuate. The interest rate is based on prime. The more equity you have and the more favorable your credit rating is, the lower your rate may be. The benefit of this type of loan is the repayment options. Your payment may be an interest only payment. Your payment is based on the amount used, not on the full loan amount available. For example, if your loan amount is $100,000 yet you only use $20,000 for home improvements, your payment will be based on the $20,000.

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Market Value

What is the market value of your home? The value of your home is based on the value of other homes in your area. An agent may do a Comparative Market Analysis. The reliability of this report depends on the experience of the agent. This value is derived from the selling price of other homes in your neighborhood and characteristics of your home. This report does not follow any guidelines mandated by any agency. The agent is not held to this market analysis. You may want to order an appraisal prior to listing your home. The cost of an appraisal may deter a seller from ordering an appraisal, knowing the buyer will pay for an appraisal during the buying process. However, if the home does not appraise up to the value of the buyer's offer, the seller may loose the sale. In all honesty, most sellers will accept an agent's CMA and list the home at the price their agent suggests.

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Private Mortgage Insurance (PMI)

In the early 1960's private mortgage insurance was created to minimize the risk of lending money. In the past, conventional loans required a very large down payment. This has given the consumer a new conventional loan product, as we know it today. You may eliminate PMI if you have an 80% LTV Loan To Value : Current mortgage balance divided by estimated market value. This can save you up to $60.00 a month or more!

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Rate Options

Fixed Rate: A mortgage in which the interest rate and payments remain the same for the life of the loan. This payment is a principal and interest payment or (P&I). The loan is amortized for a specific term (usually 30, 20 or 15 years).

Adjustable Rate Mortgage (ARM): A mortgage loan, which adjusts the interest rate in accordance with a specified index periodically as agreed (i.e. every six months). This is a great product for you if your ownership in this property will be short term. Take into consideration there is risk involved basing your repayment on future resources.

Balloon: A mortgage with periodic installments of principal and interest that do not fully amortize the loan. These loans typically amortize over 30 years. The balance of the mortgage is due in a lump sum at a specified date, usually three to five years. At that time the borrower must pay off the remaining balance, or refinance. The advantage of a Balloon Mortgage is for those who frequently sell before the large remaining balance is due.

There are additional rate options available. Please contact a Mortgage Lending Officer for more complex rate options (IE: Negative amortization)

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Who is Eligible for a VA Loan?

Veterans who served on active duty and were discharged under conditions other than dishonorable, during World War II and later periods are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days' service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days' active service. Veterans of enlisted service; which began after September 7, 1980, or officers with service beginning after October 16, 1981, must in most cases have served at least 2 years.
Persian Gulf Conflict  Basically, reservists and National Guard (members who were activated on or after August 2, 1990, served at least 90 days and were discharged honorably are eligible). VA regional office personnel may assist with eligibility questions.

Members of the Selected Reserve, including National Guard, who are not otherwise eligible and who have completed 6 years of service and have been honorably discharged or have completed 6 years of service and are still serving may be eligible. The expanded eligibility for Reserves and National Guard individuals will expire September 30, 2003. Contact the local VA office to find out what is needed to establish eligibility. Reservists will pay a slightly higher funding fee than regular veterans will.

VA: VA fixed Rate mortgage fully amortizing from 15 to 30 years in 5 year increments. Eligibility: · Must be a veteran who served the minimum duty with other than dishonorable discharge.
· Active duty with at least 181 days of duty.
· Surviving spouse of eligible vet (not remarried).
· Reservists/National Guard Acceptable.

Most important consideration, no down payment is required in most cases. Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $203,000.

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