There has been an explosion of programs and plans in the mortgage industry.
Interest rates vary according to the plans and programs. For this reason I do not advise you on any aspect of the mortgage process or recommend any specific company or program. The information provided here gives you an overview and a starting point for financing your purchase.

If you want specific information from an expert, please contact me for referrals.

Mortgage Programs

Private Sector

Conventional Loans - The only security guarantee is the value of the property.

Conforming Loans - Conventional loans that follow the terms and conditions established by the guidelines of Fannie Mae and Freddie Mac.

·Fixed-Rate Mortgage
The interest rate and the principal payments remain fixed throughout the loan. Keep in mind your monthly escrow account payment could vary from year-to-year as taxes and insurance rates change.

·Variable or Adjustable-Rate Mortgage
The interest rate on the loan fluctuates over the period of the loan. Periodic adjustments to the interest rate are made based on changes to a defined index. The loan's interest rate is determined by adding a fixed number of points to the defined index.

· Balloon Loan
Short term, fixed-rate mortgage that has monthly payments usually based on a 30-year amortization schedule and a lump sum payment due at the end of term, usually 3, 5 or 7 years. The interest rate on balloon loans is usually less than a 15-or 30-year fixed-rate mortgage.

· Piggyback Loan
A second mortgage that closes with the first. Often the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. The home buyer covers the remaining 10% with their down payment. (Some lenders will write a second mortgage of 15% or even 20% of the purchase price.)

· Housing Finance Agencies
These agencies offer special loan programs to low-and moderate-income buyers, buyers interested in rehabilitating a home in a targeted area, and other groups as defined by the agency. Working through a housing finance agency, you can receive a below market interest rate, down payment assistance and other incentives.

· Jumbo and Non-Conforming Loans
Loans above the maximum amount established by the guidelines of Fannie Mae and Freddie Mac. Often the interest rate charged for a jumbo or non-conforming loan is higher than that of a conforming loan.

· B/C Loans
Loans for borrowers who cannot meet the credit guidelines established by Fannie Mae and Freddie Mac. The purpose is to offer temporary financing to someone whose credit history disqualifies them for a conforming loan (including someone who has recently filed for bankruptcy, foreclosure or late payment on their credit report). Typically the interest rates run higher and vary depending upon the individual credit situation.

Government

FHA Loans
The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low-to-moderate income families qualify for mortgages. FHA assists first-time buyers and others who would not qualify for a conventional loan, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going market rate, while the down payment requirements for an FHA loan are lower than conventional loans. The required down payment can be as low as 3 percent and the closing costs can be included in the mortgage amount.

VA Loans
VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA Loan, which usually offers a competitive fixed interest rate, no down payment and limited closing costs. While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.

RHS Loan Programs
The Rural Housing Service (RHS), which is part of the U.S. Department of Agriculture, guarantees loans from private lenders to help low-to-moderate income families qualify for mortgages.

Loan Application Checklist

Your loan officer will tell you exactly what documentation you need
to provide for the type of loan you are applying for.
Email any questions you have to the loan officer
so that you have the answers in writing and can refer to them later.

Did You Know?
Making one extra mortgage payment a year will knock years
off your mortgage and save you thousands of dollars!
You can easily make an additional mortgage payment each year.
Have your mortgage payment automatically deducted from your account each
month with an additional 1/12 payment to be applied to the principal amount.
At the end of 12 months, you will have made an additional payment.
And you won't have to pay any “service” fees.

The Cost of Your Mortgage Loan

The same care and consideration you give to finding the right house should be applied to your search for the right mortgage lender. For most home-buyers a major determining factor in selecting a lender is the cost of the mortgage loan. But how do you determine the cost of a mortgage loan?

Shopping for a Mortgage Loan
While most buyers concentrate on interest rates, it is best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs.

More than Just Interest
A number of fees are associated with the mortgage loan, including:

· Appraisal - A carefully documented opinion of value by a licensed, professional appraiser.

· Credit Report - A detailed report of your credit, employment and residence history prepared by a credit bureau.

· Principal - The amount owed on a mortgage which does not include interest or other fees.

· Document Fees, Loan Fees and Processing Fees - Miscellaneous fees charged by the lender.

· Discount Points - Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount)

· Origination Points - the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount)

· Interest Rate - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

Prepayment Penalty Mortgages (PPMs): These loans restrict your right to prepay part or all of the principal in the loan’s early years. A prepayment fee is charged by the lender to the borrower who wishes to pay part or all of the loan ahead of schedule. The advantage of a PPM is that they often have a lower interest rate than other mortgages. NOTE MY PREVIOUS ADVICE.

Using the Annual Percentage Rate (APR) to Compare Mortgage Loans
The APR was designed to help borrowers understand the relative costs of a mortgage loan. The APR takes into account the various fees associated with the loan, which is why it is often higher than the interest rate. Understand that not all lenders calculate a loan's APR in the same way. That is why this should be only one of the factors used in selecting the best mortgage for you.

Locking-in Interest Rates
Another factor to consider when selecting a lender is whether the lender will lock-in the mortgage's interest rate and points.

Scoring your Credit - How's your FICO?

In today's increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax's model is called BEACON, while TransUnion uses EMPIRICA. While each of the models considers a range of data available in your credit report, the primary factors are:

• Credit History - How long have you had credit?
• Payment History - Do you pay your bills on time?
• Credit Card Balances - How much do you owe on how many accounts?
• Credit Inquiries - How many times have you had your credit checked?

Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 850, with higher being better. Typical home buyers likely find their scores falling between 600 and 850.

FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

What can you do about your FICO score? Unfortunately, not much. Since the score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to know your FICO score and to ensure that your credit history is correct. Conveniently, Fair Isaac has created a web site (www.myFICO.com) that let's you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score. Each of the credit services offers similar services on their web sites: www.equifax.com, www.experian.com, and www.transunion.com.

Armed with this information, you will be a more informed consumer and better positioned to obtain the most favorable mortgage available to you.