Other Loan Programs

Buy-Down Loan:

This program is a 30 Year Fix designed for borrowers who have trouble qualifying for a loan. The bank simply pays your rate down 2% for the 1st year, so that you can qualify for a loan. The bank then pays your rate down 1% for the 2nd year. The next 28 years entail approximately 0.5% Rate Hike to make up for the losses sustained by the bank in paying down your interest rate for the first two years. For Ex. 1st Yr: 5.125% Rate, 2nd Yr: 6.125% Rate, 3rd-30th year: 7.125% Rate My Thoughts: An Excellent Program if you have NO Prepayment Penalty. You can treat it as a 1 year/2 year Fix with a Very Low Rate, and refinance out of the program before the 3rd year.

Negative Amortization Loan:

A Neg-Am Loan (Option ARM) allows for a Minimal Payment Option. The rest of the actual payment is added into the balance of your loan. Whereas amortized payments reduce your balance and interest-only payments keep your balance the same, a neg am payment increases your loan balance. This is a Misunderstood Product. It should be used for real estate investors whose goal is to minimize their monthly payment in order to leverage out their investments. With a Neg Am Loan, you can calculate the appreciation and cash flow to grow your wealth. But, this program can be devastating in a declining market.

Hard Money Loan:

A Hard Money Loan is a Cash Poor, Equity Rich loan. It is a private loan where the borrower often has No Employment, No Assets, Poor Credit, and Financial Troubles...yet the lender still gives a loan to the borrower based on the strong equity of the house. These private lenders generally give Cash Out of upto 70% of the Value of the Home. These type of loans involve Upfront Points as well as Closing Costs, AND a double digit interest rate.

Reverse Mortgage Loan:

Homeowners 62 and older who have Large Equity in their homes are eligible to participate in a reverse mortgage program. The program allows homeowners to borrow against the equity in their homes. Homeowners can Receive payments on a monthly basis for as long as they live in the home. These payments are then charged into the borrowers principal balance. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. The Federal Housing Administration, which is part of HUD, collects an insurance premium from all borrowers to provide this coverage. The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. The older a borrower, the larger the percentage of the home's value that can be borrowed. There are no asset or income limitations, and the amount borrowed is capped by the maximum FHA mortgage limit for the area. As a result, owners of higher-priced homes can't borrow any more than owners of homes valued at the FHA limit.