Posts Tagged ‘Borrowers Protection Plan’


Do Your Homework – Find the Mortgage That Fits Your Lifestyle and Your Budget

by como ·

You’ve been looking at houses for months, and finally you’ve
found it–the house that’s just right. So now, all you have to do is to
purchase your new home, move in, and get settled, right? Not quite.
There’s one more big step to go-getting a mortgage loan. You’re going to
want to decide on the type of mortgage and payment terms that fit
within your budget. And you’re going to have to prepare yourself by
doing some research. What follows is valuable information that will be
crucial in helping you make loan decisions that will fit your budget and

Series: 3 Finding a Perfect Match for your Home Mortgage

Factors That Affect Your Mortgage

Mortgage payments are determined based on the following criteria:

Amount of the loan

Length of the loan

Down payment

Discount points

Closing costs

Credit quality

Income level

Lock in period

Amount: The amount of your loan can increase your interest rate if the
amount financed exceeds the conforming loan limits set by Fannie Mae and
Freddie Mac, (private corporations regulated by the federal government)
that administer loans. The conforming loan limit changes at the
beginning of each year.

Shorter loans, such as a 30 year or 15
year note, can save you thousand of dollars in interest payments over
the life of the loan, but your monthly payments will be high. An
adjustable rate mortgage may get you started with a lower interest rate
than a fixed rate mortgage, but your payments could get higher when the
interest rate changes.

Down Payment: A large down payment will
give you the best possible rate. If you’ve got the cash now and want to
lower your payments, you can pay points on your loan to lower your
mortgage rate. The concept is simple: In exchange for more money
upfront, lenders are willing to lower their interest rate, cutting the
borrower’s payments. Remember to consider upcoming expenses and closing
costs in your down payment decision.

Closing costs. In addition to
your down payment, you will need to pay closing costs for processing
your loan and transferring the property ownership from the seller to
you, the buyer. Closing costs can range from 3%-5% of your loan amount,
depending on where you live, the loan you choose and your closing date.
In some cases, you can finance certain closing costs in your mortgage
loan. When you apply for loan, your lender will give you an estimate of
closing costs, which usually include:

Origination fees.

Costs of processing your loan (includes property survey and appraisal).

Items paid in advance, such as first-year mortgage insurance
premium, first-year hazard insurance premium and first-year flood or
earthquake insurance premiums, if required.

Escrow accounts – an
account held by the lender into which the homebuyer usually pays for
city/county property taxes, mortgage insurance, and hazard insurance, if

Title insurance charges.

Recording and transfer charges.

Attorney’s fees.

Score: Your credit and debt-to-income-ratio affect the terms of your
loan through your FICO score which is used to determine your credit
rating. If you have good credit and your monthly income exceeds your
monthly debt obligations, you will get approved at a lower interest
rate. However, if your monthly income barely covers your minimum debt
obligations, you will not receive the lowest available interest rate
even if you have a good credit report.

Lock-in Rate: When shopping
for a loan remember that interest rates change frequently. It is
important to ask your mortgage representative if a lock-in rate is
possible. This will guarantee you a specific rate, provided the loan is
closed, with a set period of time.

Determine How Large a Monthly Mortgage Payment You Can Afford

Your choice of mortgage will be influenced by questions such as

How many years do you expect to live in your new home?

How important is it to be free of mortgage debt before facing your children’s college bills or planning your future retirement?

How comfortable are you with the certainty of a fixed mortgage payment vs. a payment that can change over time?

monthly payment will vary depending upon the type and length of the
loan and the amount you put down. Most lenders will help you select the
loan that’s best suited to your financial situation.

How Low an Interest Rate Can You Expect?

term loans offer lower interest rates and are divided into two types. A
Fixed mortgage means that the rate is locked in for the life of the
loan. Adjustable Rate, also called an ARM or variable rate note, is a
note that generally offers lower payments for the first year and then
changes periodically based on the terms and conditions of your note.
Paying discount “points” can lower your interest rate. If your loan
requires you to pay points or if you want to buy “down” the interest
rate using points, remember that one point equals 1% of the loan amount.

Choosing the Right Mortgage

you want the stability and predictability of a set rate for the life of
your loan, then a fixed rate mortgage may be for you. Usually the
longer the term of the mortgage, the more interest you pay over the life
of your loan. Though, a longer term means your monthly mortgage
payments will be less than they would be with a comparable shorter-term

30 year vs. 15 year fixed rate mortgage.

A 30-year
mortgage will have a lower monthly payment and a higher interest rate
than a 15-year mortgage. You’ll have a smaller monthly obligation but
you’ll pay more for your house over time because you’re paying it off
with interest for a longer period.

On the other hand, a 15-year mortgage will have a higher monthly
payment and a lower interest rate so you’ll pay less for your house
because you’re paying it off in a shorter period.

Adjustable Rate Mortgage.

are short-term fixed-rate loans: After the fixed rate term is up, the
rate adjusts at regular intervals in accordance with current interest
rate conditions at that time. A 5/1 ARM, for example, has a fixed rate
for five years and then adjusts every year for the next 25 years. (ARMs
typically run on a 30-year schedule.)

The length of the fixed-rate
term on an ARM typically can range anywhere from one month to 10 years.
The longer the rate is fixed, the higher the interest rate you’ll get.
But generally speaking — and there have been exceptions in the past —
ARMs will cost you less in the short-term. With the ARM, both your
monthly payments and interest rates should be lower than either a fixed
rate 15-year or 30-year mortgage.

The risk with an ARM is that
when interest rates rise, you could end up paying much more than you
bargained for. Check to see if your ARM has a cap rate so that if rates
increase, your change cannot exceed a certain pre-defined limit.

If you know you’ll be in a home for 12 years or more, a
30-year fixed rate mortgage might work better for you than, say, a 5/1
ARM, where you fix a rate for five years and then it adjusts every year
after that. But if you think you won’t be in the home longer than five
or six years, a 5/1 ARM might make more sense.

Mortgage Shopping Tips.

to the mortgage specialists at your bank. If you are starting to look
for a home they can asses your financial situation and help you
determine a purchase price that is within your budget and a mortgage
program that suits your lifestyle and income. In many cases your advisor
can prepare a pre-approved mortgage before you finalize your purchase.

a mortgage specialist at your bank to help you calculate payments at
different interest rates. This will help you determine a monthly payment
that can be comfortable integrated into your budget.

Types of Mortgage Programs.

lenders are committed to ensuring that your home financing experience
is rewarding and effortless. To this end, there are many programs
available to suit a variety of situations, lifestyles and your financial
profiles. These include:

Fixed-rate loan. If you’ve found a home
you plan to live in for 10-30 years, consider a fixed-rate loan. It’s
predictable and stable since the interest rate is set for the full
length of the loan. Because the monthly payment for the principal and
interest stays the same for the life of the loan, it’s easier to plan a
budget. Most lenders offer many fixed-rate loans with terms to fit your
budget, including loans that require no money down.

Adjustable-rate loan.

you plan on being in your home for a shorter period of time, or expect
your income to increase of the years, an adjustable-rate mortgage (ARM)
may just be the right fit for you. An ARM loan usually starts with a
lower initial interest rate than traditional fixed-rate loans. After a
set initial payment period (usually one, three, five, seven or ten
years), the interest rate may change periodically (usually annually or
semiannually) based on market conditions. As the rate changes, your
monthly payment changes. ARM loans feature an adjustment “cap” which
limits how much the interest rate can go up. This helps protect you from
large increases in your monthly payment.

Loans for first-time homebuyers.

banks offer affordable loans to make it easier for first-time
homebuyers with limited savings to qualify for a home loan.
Specifically, FHA and VA government loans are available to qualified
buyers, based on income or property location. These affordable financing
programs can help make it easier to buy a home since they require
little or no money down and also offer flexible credit and income

Repayment schedule.

Also consider how quickly
you’d like to repay your loan – within 15 years, 20 years, 25 years, 30
years? Do you want to make biweekly mortgage payments? Typically, the
sooner you repay the loan, the more you’ll save in interest payments.
However, the longer you extend the term of your financing, the lower
your monthly payments maybe. So when choosing a loan term, consider your
budget, your long-term spending patterns, your income over the life of
the loan and how long you plan to stay in your home.

Which loan is right for me?

The lifestyle situations below can help you decide which loan you might want to consider.

“Getting the lowest monthly payment is most important to me, and I’ll be in my home for less than five years.”

An intermediate ARM (five years or longer) if your income is fixed or expected to decline.

A short-term ARM (three years or less) if you expect your income to increase.

“Getting the lowest monthly payment is most important to me, and I’ll be in my home for more than five years.”

A fixed-term mortgage (for example, 30-year fixed).

An intermediate ARM if you expect your income to keep increasing.

“I have little money saved for a down payment.”

AN FHA loan.

A VA loan, if you are a veteran.

“I have no traditional credit references (for example, car loan or credit cards) but I pay my rent and other bills on time.”

An FHA loan.

A VA loan, if you are a veteran.

“Paying off my mortgage faster and saving money by paying less interest long-term is what’s most important to me.”

A shorter-term mortgage, such as 15- or 20-year fixed-rate loan.

A biweekly 30-year mortgage accelerates the reduction in principal
by applying more than one extra payment a year, reducing the total
interest and term of the loan

Borrowers Protection Plan

Protection Plan is an optional feature of your loan that can provide
peace of mind during difficult times – like an unexpected job loss or
disability. Borrowers Protection Plan will cancel your monthly principal
and interest payment should you lose your job or are unable to work due
to illness or injury. Borrowers Protection Plan may cancel a total of
up to 12 months, depending upon the protection option and benefit period
selected. And if you should die in an accident your entire loan balance
will be canceled.

Benefits of protection.

Affordable. Decide what you and your family need and we’ll help make it affordable.

Easy to obtain. There are no health requirements or medical exams and any size loan qualifies.

benefits. Your monthly benefits will not be reduced because of other
state unemployment benefits or disability income you may receive.

Protection options available prior to loan closing include
involuntary unemployment and disability and can be purchased
individually, or as a combination. These options also include accidental
death protection and are available on a single or joint basis.

answers and streamlined processing. The approval process should be fast
and simple. Many homebuyers who have excellent credit history can be
approved for a mortgage at the time of the application and with very
little documentation.

Hassle-free mortgages with 80% less paperwork.

a proprietary process to determine if you qualify for this streamlined
loan feature. This means less digging, sorting and collecting paperwork
for you.

Your qualification for reduced paperwork depends on a number of factors:

Strong credit — doesn’t have to be perfect

Type of mortgage you choose — many mortgage types and loan amounts up to $750,000 are eligible

Even if you don’t qualify for the 80% less paperwork mortgage feature, your mortgage request can still be approved.

a home is one of the most important events in your life. So talk to the
mortgage professionals, do your homework and select a loan that fits
your lifestyle and your budget. And enjoy the satisfaction of owning
your own home.