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It is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. To get pre-qualified for a loan, we will collect information about your debt, income, and assets. We’ll look at your credit profile and evaluate different loan programs that would work for you.

It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. To get pre-approved, you will complete a mortgage application and provide us with various information verifying your employment, income, assets and financial status such as tax returns, W-2 forms, paystubs, bank records and credit card statements. Well review your mortgage options and submit your application to the lender. Once the application process is complete you will receive a pre-approval letter indicating the amount the lender is willing to lend you for your home.

A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.

During the early amortization period of a fixed-rate loan, a large percentage of your monthly payment goes toward interest, and a much smaller part toward principal. That gradually reverses itself as the loan ages.

If you have an Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can give you more monthly payment stability.

Fixed-rate loans are available in various amortization terms: 30-year, 20-year, 15-year, 10-year, and even the new 40-year fixed rate. Some fixed-rate mortgages are called "biweekly" mortgages and shorten the life of your loan. You pay every two weeks, a total of 26 payments a year -- which adds up to an "extra" monthly payment every year.

Another new type of fixed rate loan is the 30-year fixed rate with a 10-year interest only feature to it. While the rate might be slightly higher than the traditional 30-year fixed rate loan, the borrower enjoys the comfort of a long-term fixed rate and the benefit of a lower monthly obligated payment during the initial 10 years.

Adjustable Rate Mortgages
ARMs, as we called them -- come in even more varieties. Generally, ARMs determine what you must pay based on an index, perhaps the 6-month Certificate of Deposit (CD) rate, the one-year Treasury Security rate, or the London LIBOR index.

They may adjust every six months or once a year.

Most programs have a "cap" that protects you from your monthly payment going up too much at once. There may be a cap on how much your interest rate can go up in one period -- say, no more than two percent per year, even if the underlying index goes up by more than two percent. You may have a "payment cap," that instead of capping the interest rate directly caps the amount your monthly payment can go up in one period. In addition, almost all ARM programs have a "lifetime cap" -- your interest rate can never exceed that cap amount, no matter what.

ARMs often have their lowest, most attractive rates at the beginning of the loan, and can guarantee that rate for anywhere from a month to ten years. You may hear people talking about or read about what are called "3/1 ARMs" or "5/1 ARMs" or the like. That means that the introductory rate is set for three or five years, and then adjusts according to an index every year thereafter for the life of the loan.

Loans like this are often best for people who anticipate moving -- and therefore selling the house to be mortgaged -- within three or five years, depending on how long the lower rate will be in effect.

You might choose an ARM to take advantage of a lower introductory rate and count on either moving, refinancing again or simply absorbing the higher rate after the introductory rate goes up. With ARMs, you do risk your rate going up, but you also take advantage when rates go down by pocketing more money each month that would otherwise have gone toward your mortgage payment.

FHA Mortgages
An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations.

Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.

FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are generally better, while down payment requirements are also lower than for conventional loans.

Some of the other benefits of FHA financing:

• Only a 3.5 percent down payment from the borrower’s own funds is required (can be gift funds).
  
• Closing costs can be financed by seller up to 6%.
  
• Lower monthly mortgage insurance premiums.
  
• More flexible underwriting criteria than conventional loans
  
• Parents can co-sign as non-occupant co-borrowers.
  
• Loans are assumable to qualified buyers.

It’s Your Home. It’s Your Loan. We just help you get the best one!