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Commercial Loan Matrix - PDF
Choosing the Best Loan Program
What Program Should I Choose?
Loan Types
Loan Products
Borrower Costs
Choosing
the Best Loan Program
Loan programs come in many forms and come from many sources. Just as the
loan structure, like a 30 year fixed rate mortgage, can affect your interest
rate and monthly payments, the source of funding for your loan can also
affect your rate and payments. The source of funding can also affect the
amount of your down payment and closing costs. If you have at least 3% of
the loan amount to use as a down payment, you may consider the most common
type of loan, a conventional loan. These loans consist of conforming loans,
which are secured by government sponsored entities (GSE) such as Fannie
Mae and Freddie Mac, and jumbo loans, which are funded by private investors
for loan amounts higher than the limits set by the GSE's. Conforming loans
are funded by Fannie Mae (FNMA) and Freddie Mac (FHLMC). These companies
do not lend money directly to you, but work with lenders across the country
to offer mortgage loans to meet your needs. As a secondary market for mortgage
loans, they purchase mortgages from lenders and package them into securities
that can be sold to investors. If you are looking for a large loan amount
to purchase or refinance your home, you could consider a jumbo loan, which
has a higher loan amount limit than the limits set by Fannie Mae and Freddie
Mac. Because jumbo loans cannot be funded by these two agencies, they usually
carry a higher interest rate.
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What program
should I choose?
There isn't a single or simple answer to this question. The right type
of mortgage for you depends on many different factors:
- Your current financial picture.
- How you expect your finances to change.
- How long you intend to keep your house.
- How comfortable you are with your mortgage payment
changing.
For example, a 15-year fixed rate mortgage can save
you many thousands of dollars in interest payments over the life of the
loan, but your monthly payments will be higher. An adjustable rate mortgage
may get you started with a lower monthly payment than a fixed rate mortgage
-- but your payments could get higher when the interest rate changes.
The best way to find the "right" answer is to discuss your finances, your
plans and financial prospects, and your preferences frankly with a mortgage
professional.
If you have bad credit, you may not qualify for a conventional loan. In
this case, you could consider a subprime loan. Like other loans, subprime
loans come in many forms based on the terms, loan amount and loan to value
ratio you are looking for. In addition companies will look at your credit
and give you a credit grade, which will help them determine the best loan
for your situation. With less than perfect credit, you can expect to pay
higher interest rates because of the higher risk associated with making
a loan to someone with a poor credit history.
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:: Loan
Types - New Purchase
Whether you’re purchasing your first home, investing
in rental property, or upgrading to your dream home, buying a house is
one the most important decisions you’ll ever have to make. Let us help
you find a loan that fits your specific needs. At Crest Lending Group,
we work hard to make sure you get a loan at the lowest possible interest
rate and with monthly payments you’ll be comfortable with. Give us a call
and we’ll find a loan program that is tailor made for our most important
client…you.
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:: Loan
Types - Refinance
When you're making your decision, there are several
things in mind.
First, even a small rate cut can pay off quickly. That's because you can
easily find mortgage companies willing to waive routine refinancing charges
such as application, appraisal and legal fees (which can add up to $1,500
to $3,000). Of course, in exchange for low or no up front costs, you'll
have to be willing to accept a rate that's somewhat higher than the prevailing
rock bottom.
Second, if you are planning to stay in your home for at least three to
five years, it may make sense to pay "points" (a point equals 1% of the
loan amount) and closing costs to get the lowest available rate.
And third, you can avoid laying out cash and still get a low rate by adding
the points and closing costs to your new mortgage. Does that mean shouldering
a lot of extra debt? Not necessarily. If you've had your current mortgage
for at least three years, you've probably reduced your balance by several
thousand dollars. So you may be able to tack your closing costs onto your
new loan and still end up with a mortgage that's smaller than your original
one -- plus, of course, a lower rate and lower monthly payment.
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:: Loan
Types - Private Lending
Coming Soon.
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:: Loan
Types - Construction
Whether you are looking to build the house of your
dreams or break-ground on a commercial development,
you‚ve come to the right place. The participating
lenders that specialize in construction loans for
individuals and builders will guide you through every
step of the way.
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:: Loan
Products - Fixed Rate Mortgages
The most common type of mortgage program where your
monthly payments for interest and principal never change. Property taxes
and homeowners insurance may increase, but generally your monthly payments
will be very stable.
Fixed-rate mortgages are available for 30 years, 20 years,
15 years and even 10 years. There are also "bi-weekly" mortgages, which
shorten the loan by calling for half the monthly payment every two weeks.
(Since there are 52 weeks in a year, you make 26 payments, or 13 "months"
worth, every year.)
Fixed rate fully amortizing loans have two distinct features.
First, the interest rate remains fixed for the life of the loan. Secondly,
the payments remain level for the life of the loan and are structured
to repay the loan at the end of the loan term. The most common fixed rate
loans are 15 year and 30 year mortgages.
During the early amortization period, a large percentage
of the monthly payment is used for paying the interest . As the loan is
paid down, more of the monthly payment is applied to principal . A typical
30 year fixed rate mortgage takes 22.5 years of level payments to pay
half of the original loan amount.
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:: Loan
Products - Adjustable Rate Mortgages (ARM)
An adjustable rate mortgage, or an "ARM" as they are
commonly called, is a loan type that offers a lower initial interest rate
than most fixed rate loans. The trade off is that the interest rate can
change periodically, usually in relation to an index, and the monthly
payment will go up or down accordingly.
Against the advantage of the lower payment at the beginning of the loan,
you should weigh the risk that an increase in interest rates would lead
to higher monthly payments in the future. It's a trade-off. You get a
lower rate with an ARM in exchange for assuming more risk.
For many people in a variety of situations, an ARM is the right mortgage
choice, particularly if your income is likely to increase in the future
or if you only plan on being in the home for three to five years.
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:: Loan
Products - Balloon Mortgages
Balloon loans are short term mortgages that have some
features of a fixed rate mortgage. The loans provide a level payment feature
during the term of the loan, but as opposed to the 30 year fixed rate
mortgage, balloon loans do not fully amortize over the original term.
Balloon loans can have many types of maturities, but most balloons that
are first mortgages have a term of 5 to 7 years.
At the end of the loan term there is still a remaining
principal loan balance and the mortgage company generally requires that
the loan be paid in full, which can be accomplished by refinancing. Many
companies have other options such as a conversion feature at the end of
the term. For example, the loan may convert to a 30 year fixed loan at
the thirty year market rate plus 3/8 of a percentage point. Your conversion
can be guaranteed based on certain criteria such as having made your last
24 payments on time. The balloon mortgage program with the conversion
option is often called a 7/23 Convertible or 5/25 Convertible.
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:: Loan
Products - Graduated Payment Mortgage (GPM)
The GPM is another alternative to the conventional
adjustable rate mortgage, and is making a comeback as borrowers and mortgage
companies seek alternatives to assist in qualify for home financing
Unlike an ARM, GPMs have a fixed note rate and payment
schedule. With a GPM the payments are usually fixed for one year at a
time. Each year for five years the payments graduate at 7.5% - 12.5% of
the previous years payment.
GPMs are available in 30 year and 15 year amortization,
and for both conforming and jumbo loans. With the graduated payments and
a fixed note rate, GPMs have scheduled negative amortization of approximately
10% - 12% of the loan amount depending on the note rate. The higher the
note rate the larger degree of negative amortization. This compares to
the possible negative amortization of a monthly adjusting ARM of 10% of
the loan amount. Both loans give the consumer the ability to pay the additional
principal and avoid the negative amortization. In contrast, the GPM has
a fixed payment schedule so the additional principal payments reduce the
term of the loan. The ARMs additional payments avoid the negative amortization
and the payments decrease while the term of the loan remains constant.
The scheduled negative amortization on a GPM differs depending
on the amortization schedule, the note rate and the payment increases
of the loan. GPM loans with 7.5% annual payment increases offer the lowest
qualifying rate but the largest amount of negative amortization.
On a loan of $150,000, with a 30 year amortization and
a note rate of 10.50% with 12.5% annual payment increases, the negative
amortization continues for 60 months. The qualifying rate is 5.75% and
the negative amortization is 11.34% (approximately $17,010).
The note rate of a GPM is traditionally .5% to .75% higher
than the note rate of a straight fixed rate mortgage. The higher note
rate and scheduled negative amortization of the GPM makes the cost of
the mortgage more expensive to the borrower in the long run. In addition,
the borrowers monthly payment can increase by as much as 50% by the final
payment adjustment.
The lower qualifying rate of the GPM can help borrowers
maximize their purchasing power, and can be useful in a market with rapid
appreciation. In markets where appreciation is moderate, and a borrower
needs to move during the scheduled negative amortization period they could
create an unpleasant situation.
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:: Borrower
Costs - Mortgage Refinance Costs
When you refinance your mortgage, you usually pay
off your original mortgage and sign a new loan. With a new loan, you again
pay most of the same costs you paid to get your original mortgage. These
can include settlement costs, discount points, and other fees. You also
may be charged a penalty for paying off your original loan early, although
some states prohibit this. The total expense for refinancing a mortgage
depends on the interest rate, number of points, and other costs required
to obtain a loan. To obtain the lowest rate offered, most mortgage companies
will charge several points, and the total cost can run between three and
six percent of the total amount you borrow. So, for example, on a $100,000
mortgage, the company might charge you between $3,000 and $6,000. However,
some companies may offer zero points at a higher interest rate, which
may significantly reduce your initial costs, although your payments may
be somewhat higher.
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:: Borrower
Costs - Closing Costs
Closing costs will vary from state to state, however
some basics do apply. There are credit reports ranging from $40 to $60,
appraisals $200 to $500 depending on the value of the property could be
higher, loan processing $200 to $400, title charges vary and depend on
the loan amount and will also differ if purchase or refinance. Other charges
include, escrow or closing attorney fees, lender fees can run $300 to
$700. Points or origination fees can also be added to the list. Those
fees are all considered non-recurring fees since they are unique to getting
the loan. The recurring fee would be things like property taxes, insurance,
interest and private mortgage insurance. So get a quote in writing and
compare.
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