Mortgage Programs

What is a Mortgage? 

A mortgage is simply a loan from a financial institution to purchase property. The mortgage consists of the principal (the amount of the loan being borrowed), the interest (the amount you pay to the lenders to borrow the money) and the term (the amount of time you have to repay the loan). The property goes back to the financial institution if the borrower is unable to make payments. 

Government Insured FHA

Federal Housing Administration loans are government sponsored programs that allow no or minimal down payments and lenient qualifying guidelines. The program was developed to promote home ownership with very little money down.
FHA and Blemished Credit History
If your credit is less than perfect, FHA might be the loan for you. You may qualify for an FHA loan even though you have had financial problems.

• FICO scores do not apply.
• Bankruptcy. You can obtain an FHA loan two years from the date of your bankruptcy discharge, as long as you've maintained good credit since your debts were discharged.
• Foreclosure. If you keep your credit in excellent shape since a foreclosure, an FHA loan will be available to you two years from the final date of your foreclosure.

VA Loans
Veteran Administration Loans are loans specifically for qualifying Verterans.  VA Loans allow 100% fincancing without any monthly mortgage insurance premiums. 

Fixed-Rate Mortgages 
A Fixed-rate mortgage offers a fixed interest rate for the entire term of the loan. A fixed-rate loan offers the borrower the security of knowing that both the payment amount and the interest rate will not change. Because the lender assumes a higher risk by locking into a rate for a long period of time, these loans have a higher interest rate. The most common fixed-rate mortgages are the 15 and 30 year loans. 

The 15 year loan will require a higher down payment and higher monthly payments. Advantages of a 15 year loan are: saving a substantial amount of money that would have been paid in interest and paying off the loan in half the time. 

The 30 year loan has the advantage of offering a lower monthly payment (approximately 25%) than the 15 year loan.  A lower monthly payment makes this loan easier to qualify for and also may enable the borrower to buy a home otherwise out of his reach.  The borrower will, however, pay significantly more interest over the life of the loan. 

Refinances
If your current mortgage rate or term is not suitable for you then you can refinance into a better government or conventional mortgage product.

Home Equity Cash Out
A Home Equity Cash Out allows you to refincance and untilize your home equity for other purposes; debt consolidation, home imporvements, purchases, etc.

Investment Loans
Financing is available for investment properties. 

Commercial Loans
Custom Funding USA can provide fsolutions to all small or large commercial financing needs purchse or refinances.

Adjustable-Rate Mortgages 

Adjustable-rate mortgages (ARMS) have interest rates that may change over the length of the loan. When and if the rate changes, depends on the terms of the ARM note, and the current market interest rate.

An ARM can start out with lower interest rates which may enable the borrower to qualify for a larger loan. This also means a lower monthly loan payment.  However, the borrower assumes the risk of higher payments if interest rates go up.

Most ARMS come with caps that limit how much the rate can change. An annual rate cap may be plus or minus 2%. There is also a lifetime cap which limits how high the rate can go up over the term of the loan. This rate is generally 5-6% higher than the initial interest rate. 

Most common 30 year ARMS (also referred to as hybrid ARMS because they combine fixed rate and adjustable rate features) are: 

10/1 ARM

This loan has a fixed initial rate for 10 years and then adjusts annually for 20 years. This is a recommended ARM if you plan to be in your home 7- 10 years. 

7/1 ARM

This loan has a fixed initial rate for 7 years and then adjusts annually for 23 years. This is recommended if you live in your home 5 – 7 years. 

5/1 ARM

This loan has a fixed initial rate for 5 years and adjusts annually for remaining 25years. This is recommended if you live in your home 3 – 5 years. 

3/1 ARM

This loan has a fixed initial rate for 3 years and adjusts annually for remaining 27 years. This is recommended if you plan to keep your home 1-3 years. 

1 Year ARM

This loan has a fixed initial rate for 1 year and adjusts annually for remaining 29 years. 

Graduated Payment Mortgage (GPM) 

A mortgage in which the interest increases over the period of the loan at a pre-determined schedule until it reverts to a fixed rate for the remaining term of the loan. This loan has lower payments in the early part of the loan, gradually adjusts to higher payments, and then levels off until the loan is fully paid.  

This is a good choice for young homebuyers because only the lowest initial payment amount is used in qualifying for the mortgage. These young homebuyers can also expect to see their income rise to accommodate the higher mortgage payments later in the life of the loan.

A GPM differs from an adjustable-rate mortgage because the interest rate changes are pre-determined and not dependent on the current market interest rate.  

Balloon Mortgages 

Balloon mortgages are not fully amortized loans (fully amortized means that your loan will be paid in full when you’ve made your last payment). Balloon loans have a fixed rate and monthly payment for typically 5 or 7 years. At the end of this period the full amount of the loan is due in one large “balloon” payment.  

A balloon mortgage is easier for borrowers to qualify for because it is seen as a short term loan with less risk to the lender.  It also keeps the same rate and payment for a specified time. Borrowers do, however, have to eventually come up with the last large payment. They may have to sell their home, refinance, or, if eligible, convert their loan to a fixed rate long term loan. 

Balloon mortgages are generally not the first choice of the borrower but used because he or she is unable to qualify for a fixed or adjustable-rate mortgage.  

Interest Only Loans 

Interest only loans are loans in which the monthly payments are interest only and no money is paid toward the principal of the loan. These loans usually are interest only for a specified time early in the loan, from 3 to 10 years. After the allotted time period the loan may convert to a conventional loan and is amortized so that the remainder of the loan will be paid to principal and interest until the end of term. 

The main advantage is a lower monthly payment for the initial part of the loan which enables the buyer to qualify for a higher loan amount. This is a good option if the buyer intends to sell before it converts to conventional loan with a higher payment or anticipates an income increase. Otherwise it could be trouble when the higher payments come due and the buyer may have to foreclose.