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Loan Programs: The Borrower Benefit Letter

RESPA, TILA, HVCC, and MDIA are just a few of a myriad of acronyms that the government and regulatory agencies have created the past three years in the interest of protecting home mortgage financing consumers.  Here a few of the effects this has had on anyone seeking a mortgage loan:

 One page itemized fee disclosures are now 3 page lump sum disclosures,

Fees that aren't even required as part of a home loan like home inspections are now on your cost estimates.

You can't transfer your appraiser like you used to if you were unhappy with the service, rates or fees at a lender you are working with. 

The truth is, there is a really easy solution to that makes it easy for you to figure out if a loan program makes sense for you.  The borrower benefit.  You take out a mortgage to accomplish a financial goal--if it is a refinance, you want to save money without a lot of fees, you want a stable monthly payment, or you want to pay off your loan faster. 

If you are purchasing, you shouldn't just know the MAXIMUM you can afford based on your before tax income. You should know how much money you have left over every month to pay the utilities, budget for that new faux painting in the bathroom, or to fix that leaky faucet.  You might want to meet with your accountant to see what you can do with the mortgage interest savings you'll have now that you own a home. And most importantly--you should know if you are buying a house at the "highs" or lows of the market. 

We have introduced what we hope will be the future of mortgage lending: the borrower benefit letter.  We will give you a copy of this at your initial application and sign our names to it right below yours to acknowledge the benefit we plan to deliver. 

 At closing, we'll have a "benefit delivered" letter signed and you'll have written proof that we delivered the benefit we promised.

 

Goals A Mortgage Can Help You Accomplish

Loan ProgramsCharacteristics

Conventional 30 and 15 year fixed mortgages

  • Interest rate does not change.
  • Best rates and lowest fees generally available for excellent credit scores, stable income and cash reserves.
  • Every month more of the loan is paid off, and the interest charges drop until the loan is paid in full.
  • Different loan terms are available (15- and 30-year terms are most popular).
  • The shorter the term, the faster the loan is paid off.

FHA Government 30 and 15 Year Fixed Mortgages

Adjustable Rate Options also available

  • More options for lower credit scores, flexibility for income fluctuations, streamline options for refinancing.
  • Allow for lower down payments, government down payment assistance, and allows gifts for entire down payment, and co-borrowing by relatives.
  • Mortgage insurance is required both upfront and monthly in most cases--insures the government against losses.
  • Most common loan for first time homebuyers--homebuyer education and counseling recommended.

VA Loan Program

30 yr fixed and 15 year fixed

(ARMS may be available as well)

  • Allows for veterans meeting eligiblity requirements to purchase home with 0% down payment.
  • Loan is insured by government based on funding fee that is financed on top of the loan.
  • Allows for streamline refinancing and cash out refinancing and most competitive terms available in mortgage lending currently.
  • Built in protections to keep veterans from overbuying or overborrowing.

Specialized Mortgage:

Interest-Only Mortgages

  • Should only be taken out with specific financial plan for future refinance or sale of property.
  • During the interest only period, payments are much lower than the normal "principal and interest" loan.
  • Loan balance does not get bigger.
  • Generally, interest-only payments are limited to the first 5, 10 or 15 years of the loan.
  • At the end of the interest only period, the payment may be much higher.  Highly recommend financial planning and counseling for this type of loan.

Specialized Morrtgages:

Adjustable-Rate Mortgages (ARMs)

  • Allows for lower payment for a short period of time, but still paying principal and interest..
  • Usually 1 year, 3 year, 5 year and 7 year periods.  The shorter the "adjustable" period, the lower the rate.
  • The payment after the fixed period adjusts based on a government index that you choose when you get the loan.
  • The lower interest rate may help borrowers qualify more easily, but financial planning and counseling is highly recommended.