FINANCING OPTIONS Here is some information that may be helpful in understanding your mortgage options: FIXED RATE MORTGAGE Interest rate and the amount of the monthly payment remain the same throughout the term of the loan. Today most fixed rate mortgages do not have prepayment penalties. If you are able to make one extra payment each year it can reduce a 30 year mortgage to 20 years. ADJUSTABLE RATE MORTGAGE (ARM) Interest rate is linked to a financial index, such as a Treasury security or a cost of funds - so your monthly payments can vary up or down over the life of the loan - usually 25 to 30 years. Interest rates can change monthly, annually, or every 3 or 5 years. Some ARMs have a cap on the interest rate increase, to protect the borrower. If you only plan on being in your home for a few years this may be the way to go. Other terms relating to adjustable-rate mortgages: Adjustment period: The length of time between interest rate changes. Example: one year ARM-interest changes annually. Cap: The limit on how much an interest rate or monthly payment can change at each adjustment or over the life of the loan. Conversion clause: A provision in some loans that enables you to change an ARM to a fixed rate loan, usually after the first adjustment period. This may require additional fees. Index: A measure of interest rate changes used to determine changes in the loan's interest rate over the term of the loan. Margin: The number of percentage points a lender adds to the index rate to calculate the ARM's interest rate at each adjustment. VA LOANS The VA does not lend money; it guarantees a portion of the loan so that lenders who originate the loan feel comfortable with their risk. Qualified veterans can obtain loans up to $203,000 with no down payment. VA-guaranteed loans are assumable upon qualifying by any future buyer. FHA LOANS FHA does not lend money or make loans; rather, it insures loans. The down payment can be as low as 2.25%. Either buyer or seller may pay discount points. FHA charges a 2.25% up front Mortgage Insurance Premium (or as little as 2% for a first time home buyer) that can be financed in the mortgage amount or paid in cash (no premium is required for condominiums). The borrower must also pay an annual Mortgage Insurance Premium or .5%, which is collected monthly. FHA are worth exploring if you have minimum cash, or have credit ratios higher than those required for conventional loans. They are also worth exploring if you have had some minor credit problems. COMBINED ACQUISITION & REHAB MORTGAGES Buying a historic city home or any home in Western New York that might need at least $5000 in improvements? FHA & SONYMA both have programs where you can borrow the money to acquire & the money to make improvements in one loan. It is a bit more of a process but for you it might just be worth it. If you are making a strong downpayment you may also be able to get your mortgage and apply for a home equity loan at the same time. This makes dollars available to you for improvements immediately after closing. Ask your loan officer if this option is available to you. SPECIAL PROGRAMS Most Buffalo area financial institutions have special programs which included reduced interest rates, or reduced closing costs. They are typically location or buyer attribute specific. Some have income restrictions..some DO NOT! So, even if you think your income is too high, or if you are not a first time homebuyer, or you think the wonderful new home you are purchasing could not possibly be eligible...ASK your loan officer. If you have any other questions about this important step in the home buying process please feel free to email info@holcberg.com or phone 716 884-1144. Holcberg Ltd. Real Estate Brokerage, 716-884-1144 www.holcberg.com