Loan Descriptions
Below, you will see a brief description of the many types of mortgage loans. Some of them are not used as much as others. We are available to help you with any questions that you might have.  Just call us at: 407-884-9400, Toll Free 888-732-4337, fax: 407-884-9450, or email us at info@cheepmortgages.com.

1% start rate, loan program
90% LTV full doc. 80% LTV stated. This is a 5-year program with a 30-year amortization. The PAYMENT is fixed for 1 year, then increases by 7.5% for each of the next 5 years. The maximum interest rate for the entire 30-year loan is 8.95%. Compare the payments on this loan to a 6%- 30 year fixed mortgage for $ 200,000. The payment for P&I on 30 year fixed is 1199.00, at 1.25%, your first year payment is 666.50.multiply these savings for 5 years, the additional cash flow to you is over $25,000.

Conforming Loan
A loan in which the amount borrowed is less than or equal to $359,650 (this number could be different depending on the bank)

Jumbo Loan
A loan in which the amount borrowed is greater than $359,650 (this number could be different depending on the bank)

30 Year Fixed Rate Loan
This type of loan has 360 monthly payments that remain the same for the entire 30 year period after which time the loan is paid in full. The monthly payment is based on an interest rate which does not change over the term of the loan (hence the term "fixed rate").

20 Year Fixed Rate Loan
This type of loan is the same as the 30 year fixed rate loan except the life of the loan is 240 months as opposed to 360 months. Since the loan is being paid slightly faster than the 30 year fixed rate loan, monthly payments for this type loan are higher than the 30 year fixed rate loan.

15 Year Fixed Rate Loan
This type of loan is the same as the 30 year fixed rate loan except the life of the loan is 180 months as opposed to 360 months. Since the loan is being paid faster than either the 30 year fixed rate loan or the 20 year fixed rate loan, monthly payments for this type loan are higher than the other two loans.
Generally, the longer a lender agrees to keep the interest rate "fixed", the greater the risk to the lender, therefore, in most instances, interest rates on 15 year fixed rate loans are slightly lower than on 20 or 30 year fixed rate loans.

Interest Only Loan
A mortgage is “interest only” if the monthly mortgage payment does not include any repayment of principal for some period. The payment consists of interest only. During that period, the loan balance remains unchanged.For example, if a 30-year fixed-rate loan of $100,000 at 8.5% is interest only, the payment is .085/12 times $100,000, or $708.34. Otherwise, the payment would be $768.92. This is the “fully amortizing payment” – the payment that, if maintained over the term of the loan, will pay it off completely. The interest only loan thus reduces the monthly payment by 7.9%. A loan that is interest-only for the full term would not amortize. The loan balance would be the same at term as it was at the outset. Back in the twenties, loans of this type were the norm. Borrowers typically refinanced at term, which worked fine so long as the house didn’t lose value and the borrower didn’t lose his job. But the depression of the thirties caused a large proportion of these loans to go into foreclosure. Lenders stopped writing them and have never brought them back. They want loans that eventually amortize. Hence, the interest only loans of today are interest only for a specified period, such as 5 years. At the end of that period, the payment is raised to the fully amortizing level. In such case, the new payment will be larger than it would have been if it had been fully amortizing at the outset. Suppose, for example, the interest only period on the loan described above is 5 years. Then the payment starting in month 61 would be $805.23. To reduce the payment by $60.58 for the first 5 years, the borrower would pay an additional $36.31 for the next 25. The longer the interest only period, the larger the new payment will be when the interest only period ends. If the same loan is interest only for 10 years, for example, the fully amortizing payment beginning in month 121 is $867.83. To reduce the payment by $60.58 for the first 10 years, the borrower would pay an additional $98.91 for the next 20. Interest only mortgages are for borrowers who want a lower initial payment, and have some confidence that they will be able to deal with a payment increase in the future.

Pre-approval Loan
Some lenders offer loan programs that provide borrowers the opportunity to obtain an approval for their loan before they select a property to purchase. Generally, such pre-approvals are subject only to a satisfactory appraisal of the property ultimately selected by the borrower. A pre-approval should not be confused with a pre-qualification, which is an unverified analysis of a borrower's ability to qualify for a loan and is subject to verification of a borrower's income, a borrower's assets and a satisfactory appraisal of the property selected for purchase.

First-Time Home buyer Loan
A loan is considered a 1st time home buyer loan when it has one or more features that are available only to 1st time home buyers. For example, a lender may reduce its interest rate (typically by one eighth to one quarter of one percent), reduce or eliminate its closing costs and, if an adjustable rate mortgage, reduce its margin (typically by one quarter of one percent). Such a loan may also have less stringent loan qualification guidelines.

B/C Credit Loan
These types of loans are available to borrowers who have or have had credit problems such as being late on or defaulting on the repayment of loans or credit cards. Although such loans are available as fixed rate or adjustable rate mortgage loans, the interest rate and/or costs associated with such loans are generally higher than loans available to borrowers who do not have a history of credit issues to reflect the fact that the risk associated with such loans is generally higher. Borrowers who do not have a history of credit issues are said to have "A" credit. Those with a history of credit issues are said to have "B" credit or "C" credit depending on the severity of the credit issues.

Assumable Loan
This type of loan does not have to be paid off by a borrower when the borrower sells his/her home. Instead, the new buyer of the home may assume the obligation of the initial buyer to repay the loan in accordance with the terms of the loan. Generally, most loans are not assumable and some that are, may be subject to the lender's approval of the new borrower and/or the lender's ability to modify the terms of the loan.

Second Home Loan
This type of loan is used to purchase or refinance a property other than a borrower's principal residence. In most instances, such a property is a borrower's vacation home (or "second home"). Provided that the property is not strictly an investment property, the interest rate and costs charged on such loans will generally be the same as those available on loans used to purchase or refinance a borrower's principal residence.

No Income/No Asset Verification Loan
This type of loan is similar to a No Income Verification Loan and a No Asset Verification Loan except it is used by borrowers who do not wish to or are unable to verify their income and their assets. Once again, the interest rate and/or costs for such loans may be slightly higher than normal to reflect the higher degree of risk involved in loaning to borrowers without verifying their income or assets. Such risk is often offset, to some degree, by borrowers who have a significant history of paying loans of a similar type as the one being sought or who are borrowing only a small percentage of a property's value.

Government Loan
This type of loan is guaranteed by a federal agency such as the Veterans Administration or the Federal Housing Administration or by a State agency such as a State housing authority. As a result, such loans are typically offered at reduced interest rates and have less stringent loan qualification guidelines. Such loans, however, are generally targeted to a specific group of people and contain income, purchase price or other eligibility requirements.

Construction Loan
This type of loan is typically used to finance the construction of a home. It may or may not also include the purchase of the land upon which the home is to be built. Unlike a typical mortgage loan where the entire amount of the loan is disbursed to the borrower at the time the loan transaction is consummated, a construction loan typically involves a series of disbursements which are linked to a construction schedule. Some construction loans have fixed interest rates, others have variable interest rates. In addition, some construction loans automatically convert to a regular mortgage (referred to as "permanent" financing) once construction has been completed, while others require another loan transaction to take place so the borrower can payoff the construction loan and obtain permanent financing.

Bridge Loan
This type of loan is offered by lenders to borrowers who plan to use money from the sale of their current property to purchase their new property but are moving into the new property before the sale of their current property takes place. In such instances, a bridge loan is obtained, (based on and secured by the borrower's equity in their current property), to "bridge" the time between when the borrower buys their new property and the time when the borrower sells their current property At the time of the sale of the current property, the proceeds from such sale are used to pay off the bridge loan. Typically, bridge loans are for a short period of time (e.g. 3 - 6 months) and feature adjustable interest rates tied to an index such as the prime interest rate.

Convertible Loan
This type of loan refers to an adjustable rate mortgage that contains a feature which allows a borrower to convert their loan from an adjustable rate mortgage to a fixed rate mortgage. Such loans generally contain a time period during which the borrower may exercise his/her option to convert (typically between the 13th and 60th month of the loan). The new fixed interest rate that the borrower converts to is based upon fluctuations in an index (typically the fixed interest rate offered at that time by the Federal National Mortgage Association (60 day mandatory yield rate) and is calculated by adding a specified amount to the index (typically .625% - 1.25%). For example, if the index equals 7.0% at the time of conversion and the margin is 1.0%, the new interest rate would be 8.0%. Some lenders charge borrowers a fee to exercise their conversion option, however, such fees generally do not exceed $250.

Land Loan
While the typical mortgage loan involves both a structure and the land upon which the structure is built, this type of loan involves only land on which a structure has yet to be built.

No Income Verification Loan
These types of loans are available to borrowers who, for one reason or another, do not wish to or are unable to verify their annual income. An example of such borrowers includes those who obtain revenue from sources they do not wish to divulge or those that receive all or a portion of their income in cash. While available from some lenders as fixed or adjustable rate loans, the interest rate and/or costs may be slightly higher than normal to reflect the higher degree of risk involved in loaning to borrowers whose incomes have not been verified. Such risk is often offset to some degree by borrowers who have significant verifiable assets or who are borrowing only a small percentage of a property's value.

3/1 Adjustable Rate Mortgage (ARM)
This type of loan has monthly payments that are based on a 30 year repayment schedule and the interest rate remains fixed for the first 36 months (three years). After that time the interest rate (and, therefore, the monthly payments) may change every 12 months (one year). This is referred to as the "adjustment period". The new rate is based upon fluctuations in an index (typically the One Year Treasury Security) and is calculated by adding a specified amount to the index. The amount that is added to the index is called the "margin" (typically 2.50% - 3.00%). For example, if the index equals 5.0% at the time of adjustment and the margin equals 2.75%, the new interest rate would be 7.75%. However, this type of loan program usually has limits on how much the interest rate can change (either up or down) at each adjustment date, compared with the interest rate being charged before the new adjustment is made. Typically, this limit is 2% and is referred to as an "adjustment cap". There is also a limit as to how much the interest rate can change (either up or down) from the initial interest rate over the entire life of the loan (typically 6%) and this is referred to as a "lifetime cap". The monthly payment changes, as needed, at each adjustment period, to reflect the adjusted rate.

5/1 Adjustable Rate Mortgage (ARM)
This type of loan is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first 60 months (five years) as opposed to the first 36 months. After that time the interest rate (and, therefore, the monthly payments) may change every 12 months (one year). As with a 3/1 ARM, the index is typically the One Year Treasury Security index, the margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

7/1 Adjustable Rate Mortgage (ARM)
This type of loan is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first 84 months (seven years) as opposed to the first 36 months. After that time the interest rate (and, therefore, the monthly payments) may change every 12 months (one year). As with a 3/1 ARM and a 5/1 ARM, the index is typically the One Year Treasury Security index, the margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

No Asset Verification Loan
This type of loan is similar to a No Income Verification Loan except it is used by borrowers who do not wish to or are unable to verify their assets as opposed to verifying their income. As with No Income Verification loans, the interest rate and/or costs may be slightly higher than normal to reflect the higher degree of risk involved in loaning to borrowers without verifying their assets. Here, such risk is often offset to some degree by borrowers who have significant verifiable incomes or who are only borrowing a small percentage of a property's value.

Foreign National Loans: 80% LTV verify
Income, assets, employment, open a U.S. bank account. For 70% LTV. Open a U.S. bank account with funds to close.

We are available to help you with any questions that you might have. Just call at: 407-884-9400, Toll Free 888-732-4337, fax: 407-884-9450, or email at info@cheepmortgages.com.