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Loan Programs
What Are The Basic Loan Types?
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There are many loan products designed to meet the borrowers
individual criteria. Most of these products fall under a few
basic loan types.
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15-Year and 30-Year Fixed Rate:
Payment and rate stay the same from start to finish.
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5 and 7 Year Balloons:
Lower start rate. Some of the balloon programs may be
converted to an adjustable rate or a fixed rate after
the 5 or 7 years, with very low fee and attractive rate.
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Adjustable Rate Mortgage (ARM):
Lowest start rate. Adjusts either every 6 months or every
12 months depending on program and grade and is based on
the economy, 6% ceiling for prime and 7% ceiling for
sub-prime.
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5/1 and 7/1 Fixed Rate:
Rate is fixed for the first 5 or 7 years, then shifts to an
adjustable rate mortgage (ARM).
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2/28 and 3/27 ARM:
An ARM program that is fixed for the first 2 or 3 years, then
shifts into a 6 month adjustable rate mortgage. It is a
sub-prime program giving you a rate lower than the sub-prime
30-year fixed. If you have had credit problems, it allows a
window of time for credit rebuilding and seasoning after which
you should refinance this loan.
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What Should I Look For?
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Are You Moving in the First Few Years?
You may want to consider a balloon mortgage. Some balloon
loans allow you to convert to a longer term if you find
the 5 or 7 years was not enough time. Conversions are
easy and reasonable. When you consider this loan, ask if
the program is convertible.
Do You Need the Lowest Possible Rate to Qualify?
To qualify for the house you want, an adjustable rate or
a 7-year balloon may be the answer.
Do You Want a Fixed Predictable Loan?
If you want a fixed predictable loan for a long time, the
15-year or 30-year fixed is probably the best, especially
when you have good credit.
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Which Program is Best for Me?
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Here are a few things to keep in mind when selecting a loan program.
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Residency
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Recommended Program
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1-3 Years
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3/1 ARM, 1 year ARM, or 6 month ARM
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3-5 Years
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5/1 ARM
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5-7 Years
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7/1 ARM
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7-10 Years
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10/1 ARM, 30 year fixed or 15 year fixed
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10+ Years
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30 year fixed or 15 year fixed
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