Mortgage
Loan Programs 100% RHCD Program
97% FNMA
Second Home Financing
Investor/Rental Property
95% Rate or Term Refinancing
No Income Verification
No Program (No
Documentation Loans)
Fixed Rate Home Equity Loans
Adjustable Rate Loans
Buy a home with no money down
100% financing
First, nothing about the 100% loan is free of costs. In order to
close your loan, there may be costs you have to pay such as attorney
fees, or escrow, appraisal costs, loan documents and other costs.
Even if somebody pays these costs for you, there is one very large
payment you will be paying; you will be making a mortgage payment
each month to a lender who owns your loan.
We can analyze the real costs of your 100% loan and make an educated
decision whether such a loan is right for you.
You just bought your home with this 100% loan and now the payments
begin. You now realize the payments are definitely going to be higher
than if you would have applied as down payment. In general you may
pay as much as 2% higher in rate for such a program.
Should you take the 100% loan? "Is it too good to be true?" The
answer depends on your prospective. 100% loans help you buy property
without any down payment. You may still, however, still need to
pay closing costs. If you cannot come up with a large amount for
a down payment to buy then you may be surprised to know that you
could be owning your home right now with one of these loans.
The payments may be higher than other loans requiring down payments,
but you could more easily buy a home with one of these loans than
accumulate the money for the down payment. With rates being very
low right now you may be surprised to find out how low our rates
are -- even for 100% loans.
100% RHCD Program
This program provides 100% financing for borrowers who have
not owned a home for the previous three years. The maximum loan
amount is 100% of the appraised value not to exceed HUD limitations
for the geographical area. There is no mortgage insurance requirement,
however a one time fee is paid at closing which goes to a fund which
guarantees these loans. In addition, homes financed must meet certain
construction and thermal qualities.
97% FNMA
Designed to assist low to moderate income buyers with income levels
up to 100% of the area median income. This program affords more
underwriting flexibility to help borrowers qualify.
Second Home Financing
A wide variety of plans are available to assist buyers with the
purchase of a second aka/vacation home, providing up to 100% of
the purchase price, depending on the amount. Payment terms include
15 and 30 year fixed rate, balloon loans and a typical selection
of ARM programs.
Investor/Rental Property
Some buyers of vacation property intend to place the property
in a seasonal rental program to generate income during periods the
property is not in use. In addition to traditional products for
this purpose Aztec Mortgage offers programs which will allow the
use of the projected rental income to offset the payment for qualifying
purposes. Higher amounts are available with differing equity requirements
and certain programs will allow multiple property ownership.
95% Rate or Term Refinancing
If you financed your home during a period of higher interest rates
we at Aztec Mortgage can place you in a lower rate program of up
to 95% of the appraised value.
No Income Verification
Aztec Mortgage offers financing to self-employed borrowers
or special situation individuals who do not wish to provide tax
returns, pay stubs or company P&L's to confirm income. We accept
income as stated and only confirm employment to the extent of position
and length of time. These programs will advance up to 80% of the
appraised value.
No Doc Program
The term NO is often confused with No Income Verification.
There is significant difference in the program requirements for
each. Our No program requires no proof of income and does not require
the borrower to provide any information regarding employment. These
loans are suitable for people with a down payment of 30-40% who
are making changes in residency which will impact the analysis of
stable income.
Fixed Rate Home Equity
Loans
Aztec Mortgage can provide equity financing for up to 95% of the
appraised value at fixed interest rates as opposed to variable rates
offered by most banks. Payment terms are available up to 180 months
with no Origination or Brokers Fees.
Adjustable Rate Mortgages
Adjustable Rate Mortgages (Arms) have become on of the most
popular and effective tools for helping some prospective home buyers
achieve their dream of home ownership. Developed during a time of
high interest rates that kept many people out of the housing market,
the ARM offers lower initial rates by sharing the future risk of
higher rates between borrower and lender.
There are several things to compare when looking at different ARM
products. If you are thinking about getting an adjustable rate mortgage,
make sure you inform yourself on how they adjust and what it is
based on.
One of the last things to use for a good comparison is the start
rate. A low start rate is always nice to have. Just make sure you
are looking at the whole picture because that nice low rate won’t
stay there for very long. They usually adjust either every 6 months
or every year.
Arms can be an excellent choice of financing under certain conditions,
such as rising income expectations, high interest rates, and short-term
home ownership. But because payments and interest rates can increase,
either steadily or irregularly, home buyers considering this kind
of mortgage need to have the income to keep up with all possible
rate and/or payment changes. Each ARM has four basic components:
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Initial interest rate, which is typically one to three
percentage points lower than that of most fixed-rate mortgages.
Lower interest rates also make Arms somewhat easier to qualify
for. The initial interest rate is tied to certain economic
indicators that dictate in part what the monthly payments
will be.
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Adjustment interval, at the time between changes in
the interest rate and/or monthly payment will be.
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Index, against which lenders measure the difference
between what they are making on their investment in the mortgage
and what they could be making on other types of investments.
The most popular index is based on the rate of return on a
one- year Treasury bill (also called T-bill).
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Margin, or the additional amount the lender adds to
the index to establish the adjusted interest rate on an ARM.
The margin is usually 1.5 percent to 2.5 percent.
It is the index plus the margin that will determine what the
interest rate will eventually be.
The Index
An Arm’s interest rate goes up and down according to a
nationally published index. The lender has no control over the index
and cannot arbitrarily adjust your rate. Your rate is determined
by the index.
The index is what the lender uses as a reference for what it might
cost to take in money that it can then lend. Take the CD Index as
an example. If a lender is currently paying 5% to depositors for
Certificates of Deposit it must then make up that cost when it takes
those funds and lends them out.
The index on an adjustable rate mortgage
will change during the time that you have the loan. So whatever
the index is at when you initially get your loan you can be sure
that it will change during the time you have your loan. An index
can go up or down depending on the current market conditions. There
are several different indexes and they are tied to different market
indicators that will change differently.
Libor
This is the London Interbank Offered Rate index. It is an average
of the interest rates that major international banks charge each
other to borrow U.S. dollars in the London money market. These rates
are available in 1, 3, 6, and 12 month terms. The index used, and
the source of the index will vary by lender. Common sources are
the Wall Street Journal and Fannie Mae. The interest rate on many
LIBOR indexed ARM loans are adjusted every 6 months. Libor also
changes quite rapidly to adjustments in interest rates.
Margins
The margin is the markup that lenders charge on the money they
are lending. It is usually somewhere around 2.50%. The margin does
not change during the life of the loan. If your lender offers you
various margins, you should consider the lower margin since it will
have an impact on how much your rate will increase during the loan
term. It is the index plus the margin that gives you the fully indexed
rate. This is the rate that your loan should actually be at according
to current market conditions. If you have a low start rate, you
can be sure it will adjust to the maximum amount it is allowed to
at every adjustment period until it reaches the fully indexed rate.
Remember though, that the fully indexed rate will change because
the index changes, even though the margin does not.
Adjustments
It is important to find out how often the particular ARM loan
you are looking at will adjust. Adjustments are usually every 6
or 12 months. If your loan adjusts monthly his should alert you
that this loan might have negative amortization. Negative Amortization
loans will be discussed later in this chapter.
The lender must inform you before your interest rate is about to
adjust. There are usually limits built into the loan as to how much
the rate can increase at any one time. These limits are known as
periodic rate caps. When shopping for an ARM loan always find out
how often the loan will adjust, and what the interest rate caps
are.
Periodic Adjustable Rate Cap
There are two types of rate caps. There is the periodic adjustment
cap and the lifetime cap. The periodic adjustable rate cap limits
the maximum rate change, up or down, allowed for each adjustment.
If your ARM adjusts every 6 months, the periodic cap is usually
1% (one percentage point of your loan amount). If your ARM adjusts
every 12 months the periodic cap is usually 2%.
Lifetime Cap
You should never take an ARM without a lifetime cap. This cap
limits the maximum amount that the interest rate can adjust over
the life of the loan. ARM loans usually have a lifetime cap of 5
to 6 % above the start rate of the loan. When deciding on an ARM
loan always figure your payment at the maximum rate. This way you
will know in advance the very worst-case interest rate for your
loan.
Negative Amortization Loans
Some loans have caps for the amount of your monthly
payment. At first this may appear to be beneficial because even
though your interest rate might be at the fully indexed level, your
payment will only adjust a certain percentage each year. This is
a negative amortized loan. With this type of loan you may get a
low starting interest rate for the first 3 months and then the loan
will go to the fully indexed rate. Even though the rate has adjusted
to the fully indexed rate, your monthly payment will increase only
once per year. When it does increase, it can only increase by a
certain percentage from what it was. This is the payment cap.
When you have a loan where the payment does not adjust
to meet the interest rate being charged on the loan, you are not
paying off all of the interest each month. What then occurs is the
unpaid interest is added on to the balance of your loan. You are
not fully paying off your mortgage over the 30 year period as you
would in a fully amortized loan over 30 years.
This type of loan does have some benefits. It is
usually easier to qualify for and can help out buyers who are having
problems qualifying at the standard 30 year fixed rate. It also
usually offers the borrower an option on how they wish to pay the
loan off each month. They can pay the fully amortized payment, and
not allow the loan to go into negative amortization. They can pay
the full interest only payment, which does not pay the mortgage
down but also does not add to the mortgage balance. They can pay
the fully amortized payment for a 15-year loan and pay the balance
in full in 15 years. They can also pay the smallest payment allowed
which is at the payment cap and allows the loan balance to increase.
If your negative amortization loan has this feature, you can usually
choose each month which payment option you want to take. This can
often make this type of loan very flexible. It is important to remember
though, that if you are the type of borrower who will more then
likely always pay the minimum due each month, this type of loan
is probably not for you.
Before you make your final decision on an ARM loan you should ask
yourself the following questions:
- Have you budgeted for higher mortgage payments? Can you afford
to pay the increases in your mortgage and still be able to accomplish
your other financial goals?
- Will you have at least 6 months worth of living expenses left
over in an accessible account after close of escrow? This will
help to cover rising mortgage payments.
- Do you know that you can pay the highest payment your arm loan
may reach? This is the payment if the interest rate on the loan
were to reach the maximum rate possible. Your lender should be
able to tell you this payment.
- If you are borrowing the maximum amount allowable for the sales
price of the house, do you have a stable job and steady income?
Do you expect the size of your family to change in the near future?
It is important to budget for any possible life changes.
- Will an increasing mortgage payment create undo stress in your
life? If you are the type of individual that does not easily handle
changes such as this, an adjustable mortgage may not be a good
choice for you.
An adjustable rate mortgage could very well save you
money over a fixed rate mortgage on the life of your loan. Just
consider if you are financially and emotionally secure enough to
handle the maximum possible payments over the life of the loan.
Another thing you need to consider when choosing
the type of loan that is right for you is the length of time you
expect to be living in the home. If you don’t plan on staying
there for a long period of time, (usually less then 5 years) an
ARM loan might be a good idea. For the first 2 –3 years of
an ARM loan you can usually save money over the prevailing 30 year
fixed rate. If you expect to hold on to your home for
a longer period of time, a fixed rate loan can be the best way to
go.
In addition to the four basic components, an ARM
usually contains certain consumer safeguards such as interest rate
caps, which limit the amount that the interest rate applied to the
payments may move. This prevents the amount of interest the consumer
pays from rising higher than perhaps the homeowner can afford. For
instance, a typical ARM would have a two percentage point cap over
the life of the loan. That means that a loan with an initial interest
rate of 9.75 percent would be able to go no higher than 14.75 percent
over the life of the loan, and it would be able to move no more
than two percentage points per year.
Another safeguard found on some Arms are monthly payment
caps that limit the amount homeowners need to increase their payments
at adjustment time. Monthly payment caps can, however, sometimes
prevent the monthly payments from increasing enough to keep up with
the rise in the interest rate, causing negative amortization-resulting
in higher or more payments for the homeowner later on.
Other options you should ask about when shopping for an ARM are:
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Assumability, or whether you may transfer the mortgage
to a new home buyer, usually with the same terms if the new
home buyer qualifies for the loan. Arms are almost always
assumable.
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Convertibility allows the borrower to change an ARM
to a fixed-rate mortgage, usually at the end of some predetermined
period, locking in a lower interest rate.
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