There are many loan programs available - too numerous to cover them all. We've highlighted the programs more commonly offered today. Characteristics of each loan program are unique, so it is best to consult a Nosari Home Mortgage loan officer for more information and to become familiar with the details of the programs available to you.
To help determine the best loan program for you, consider the following:
How important is rapid equity buildup? If rapid equity buildup is a factor, consider a shorter amortization period, such as a 15-year, fixed-rate mortgage.
- Ability to qualify for current market rates.
- Estimate how long you'll stay in the home you're purchasing.
- Anticipating interest rate jumps.
Loan Programs and Characteristics
15 and 30-Year Fixed-Rate Mortgages
- Interest rate does not change.
- Principal and interest (P & I) does not change.
- Different loan terms are available (15 and 30-year terms are the most popular).
- The shorter the term, the faster equity is built and the loan is paid off.
Fixed-Rate Balloons
- P & I payment and interest rate do not change.
- Regular monthly P & I payments are based on 30-year amortization, while the unpaid balance (balloon) is due at the end of a shorter, predetermined term, typically 5, 7 or 10 years.
- Interest rate is typically less than fixed-rate loans.
- Most borrowers anticipate refinancing or selling prior to the end of the balloon term.
Fixed-Rate with Temporary Buydown
- Borrowers or the seller may pay to temporarily "buy down," or lower, the interest rate.
- Decreased interest rate reduces the monthly payment.
- Lower interest rate may help borrowers qualify more easily; qualifying factors may vary.
- Interest rate/payment is typically reduced for 1, 2 or 3 years.
Interest-Only Mortgages
- There are no reductions to the principal amount.
- There is no provision for negative amortization.
- Payments may increase up to an amortized amount, but the loan balance itself does not increase.
- Generally, interest-only payments are limited to the first 5, 10 or 15 years of the loan.
- After that, the loan is amortized for the remainder of its term.
Adjustable-Rate Mortgages (ARMs)
- There is potential for the interest rate/payment to fluctuate.
- ARMs transfer to borrowers a portion of the risk associated with a changing economy.
- In exchange for sharing the risk, ARMs offer borrowers initial interest rates that are substantially lower than fixed-rate mortgages.
- The lower interest rate may help borrowers qualify more easily; qualifying factors may vary.
Interest-Only Loan
Interest-only loan programs provide the same features as fixed and variable rate programs, and they additionally offer a lower payment option. With an interest-only loan payment option, you pay only the interest portion of the payment but no principal.
Advantages
- Several payment options
- Lower monthly payments
- Qualify for a higher loan amount
- Qualify at the interest only payment
- Option to pay the full principal and interest payment
- Interest only payments for up to ten years
Disadvantages
- Higher rates
- Principal loan balance will not decrease during the interest-only payment period
- Payment will be higher for the remaining term
An interest-only loan can be more expensive compared to a fully amortized loan. Many lenders add a fee of one-quarter point for the interest-only option. Interest-only payment options allow you to qualify at the starting interest only payment. This gives you more buying power and a lower monthly payment compared to an amortized loan. You pay interest based on your principal balance. On an interest only loan, your principal balance does not decrease, therefore, you pay more interest with this option.
