LOAN PRODUCTS

Adjustable Rate Mortgage

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Adjustable Rate Mortgages (ARM) Offer Flexibility The stability of a conventional fixed-rate mortgage works beautifully for settled homeowners who value a predictable monthly payment. But an adjustable rate mortgage might be the right choice for you – especially if you are planning to move within five years. How does an ARM work? An adjustable rate mortgage is an alternative to a fixed-rate home loan. Typical advantages of ARMs include:

• Lower starting interest rate
• Lower starting monthly payment
• Ability to afford more house space
• Possible to pay less in return, in favorable market conditions

Homeowners with an ARM take advantage of an “introductory” interest rate set lower than that for conventional loans. The loan proceeds at this rate for an agreed-upon period of time, usually several years. Once the introductory period expires, the interest rate “resets” – moves up or down in line with the movement of an “index” (major interest rate). Following this movement, the amount of interest you pay each month gets larger or smaller. Hybrid ARMs are signified by the fractions in their titles – 3/1, 5/1, 7/1, 10/1. The first digit tells you the number of years with the introductory rate. The second digit reveals the length of the adjustment period once it becomes a variable rate. For instance, on a 5/1 rate, the first reset takes place after five years. The next reset can take place one year later, and every 1 year after that, until the end of the loan. Should I look at an ARM? There are a number of borrowers well suited to an adjustable rate home loan. They are particularly good for people who think they will move during the introductory period – a starter home, a short-term job transfer, etc. ARM borrowers typically have some of the following characteristics:

• An income that can handle the maximum rate and monthly payment
• Steady upward movement of income reasonably expected over the coming years
• A low debt load that would not interfere with payments
• Short-term ownership

Recent changes to ARM loans protect borrowers who take this option. These home loans have an adjustment cap and a lifetime cap, which limit the amount that an interest rate can adjust – in one adjustment period and over the loan term, respectively. There are also a series of disclosures that the lender must make, such as maximum interest rate and payment. The successful ARM candidate studies all of this information and carefully considers how it applies to their own situation before making a sound decision.

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Conventional Home Loans

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What is a Conventional Home Loan? A conventional home loan is a mortgage that is not insured, or guaranteed, by the federal government. They’re popular with borrowers who have a stable job and income, who can afford a down payment, and people who are financially stable overall. Government-backed loans like the VA, FHA, USDA and other loan programs are designed for people who can’t afford a significant down payment, have less than perfect credit, are first-time homebuyers, and others who may need some type of financing assistance. With a conventional loan, PrimeLending sets the terms of the loan and works with the borrower directly. In this situation, PrimeLending has determined the borrower has the ability to make all their payments on time, and will not default on the loan. Government-backed loans, on the other hand, have terms set by the federal government who then insures or guarantees the loan, protecting the lender in the event a borrower defaults on the mortgage. Conventional Home Loan Advantages Conventional home loans are available for new home purchases and refinancing. They can sometimes be harder to qualify for because of additional credit and financial requirements. However, you‘ll generally find they offer much more flexible terms and fewer restrictions than government-backed loans. Advantages of conventional loans from PrimeLending include:

• They are much simpler to apply and qualify for, with less paper work, and you’ll have fewer rules and regulations to meet.
• You have a lot more options to choose from, the terms are more flexible and easier to customize and match to your financial situation and goals.
• They can be used for almost all types of properties, from single- and multi-family homes to condominiums and even manufactured homes.
• If you have at least 20% to put down on a purchase, or at least 20% equity when refinancing, you are not required to pay mortgage insurance.
• Conventional loan rates can often be lower than other loan types.

Types of Conventional Loans from PrimeLending There are two types of conventional loans: fixed-rate and adjustable rate mortgages.

• Fixed-rate loans have an interest rate that does not change for the life of loan. 15- and 30-year terms are the most common. They offer stable, predictable payments that also don’t change. Monthly payments usually very low because they’re spread out over time. They’re great long-term loans if you plan to stay in your house for at least seven or more years.
  
• Adjustable rate mortgages have an interest rate that does change. There’s an initial up-front period when the rate is fixed, usually one year. During this time, the interest rate and monthly payments are even lower than a fixed-rate mortgage. However, after the initial period, your rate can change or adjust, usually higher, along with your monthly payments. Adjustable rates are ideal for people who don’t plan on staying in their home past the time when the interest rate will change, usually after 3-, 5-, 7- or 10-year terms.

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FHA Cash Out Refinance

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If you've been in your home for some time or you've made some upgrades – or both, chances are your home may be worth more than what you owe on your mortgage. The difference between your home's value and what you owe on it is your available equity, and when you choose a cash-out refinance, you can gain access to that extra equity. Refinancing with a loan backed by the Federal Housing Administration (FHA) could make it easier for you to qualify, especially if you have less-than-ideal credit, variable income or a higher debt-to-income ratio. That's because FHA loans tend to have more relaxed lending guidelines. Why choose an FHA cash-out refinance? There are lots of reasons to tap into your home's equity, including:

• To pay for college or other education for themselves, a child or grandchild
• To pay for other major expenses like a wedding or a dream vacation or family reunion
• To make upgrades to the home, like a pool, new deck or addition, that will make living in the home more enjoyable and potentially raise the home's value
• To make improvements like walk-in-showers that will enable older homeowners to "age in place"
• To fund a nest egg or other investments
• To consolidate higher-interest debts like credit cards, personal loans or car loans

Cash-out refinance mortgages can provide you with the financial flexibility you've been looking for, and if you can lock in one of today's lower rates, the deal can be even sweeter. If you're considering a cash-out refi, this may be the perfect time to lock in your rate.

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FHA Loans

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What are the Benefits of an FHA Loan? FHA home loan programs typically help first-time homebuyers, seniors or others with limits on what they can afford. FHA home loans offer:

• A low 3.5% down payment
• Flexible income and credit requirements
• Low closing costs

Are There Limits to an FHA Loan? Some FHA home loans have a loan value cap based on location, but keep in mind that the typical FHA candidate already has financial limits. That makes this less of an issue. The program has no minimum credit score, although the lender might, and the chances of approval get better as the scores get higher. FHA Fixed Rate Home Loans There are two types of fixed FHA mortgage rates (offer the same rate throughout the life of the loan):

• 30-year fixed rate FHA
• 15-year fixed rate FHA

Both options offer the same interest rate stability, but the 15-year term has higher monthly payments, giving you a faster way to build up home equity. You can use this higher equity as a down payment when you move to your next house. FHA Adjustable-Rate Mortgages The 15-year alternative also gives you greater power to move. With a higher monthly payment, you build up more equity in the house sooner. This means you can use proceeds from a house sale to make a bigger down payment on a future purchase. An FHA adjustable rate mortgage (ARM) lets homeowners pay a low introductory interest rate for the first few years, then move to a new home before it adjusts, possibly upwards. If you know this is a starter home that you will leave in a few short years, then an ARM could make sense for you. PrimeLending offers the 5-year hybrid ARM (fixed for the first 5 years, change annually after that, annual cap of 2 percentage point and a lifetime cap of 6 percentage points.)

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Fixed Rate Mortgage

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What is a Fixed-Rate Mortgage? PrimeLending fixed-rate loans have an interest rate that will not change over the life of the loan. One of the most common types of home mortgages available, you can choose a conventional loan, or a government-backed loan like the FHA, VA and USDA mortgage programs. You can also use them to buy a new home, or to refinance your current home. Here’s why fixed-rate mortgages from PrimeLending are so popular:

• Your interest rate will never go up, even if the overall market rates go higher.
• You monthly payments will never change, they stay predictable for the life of the loan.
• Very low monthly payments are available on long-term fixed-rate mortgages.
• The interest you pay on the loan is tax-deductible1, providing a welcome benefit at tax time.
• Many different down payment options and assistance programs are available.2
• Some programs have as little as 3% down and up to 100% financing3
• You have long- and short-term options to choose from

30-year and 15-year fixed-rate mortgages Monthly mortgage payments includes a portion that is applied toward both principal and interest.4 Principal goes directly to pay off the loan, increasing the equity you have in your home. Interest is the cost of borrowing the money. As a general rule, at the beginning of a fixed-rate loan, a higher percentage of each monthly payment is applied toward interest, not principal. Over the course of the term, this will even out and reverse as a larger percentage of each payment goes toward principal. This is important to remember when deciding which fixed-rate mortgage will work best for you.

• 30-year fixed-rate mortgage: Considered a long-term mortgage, this offers some of the lowest monthly payments available since they’re spread out over a longer period of time. However, because you make more payments, you pay more interest over time. This is a great choice if you plan on staying in the home for a long period of time – at least seven to ten years. But even if that’s not your plan, the low monthly payments can still make this a smart choice. You just won’t build equity as fast.
  
• 15-year fixed-rate mortgage: This is considered a short-term mortgage. You can expect the monthly payments to be somewhat higher because they’re not spread out as long. But because the term is shorter, you pay a lot less toward interest and can save thousands over the life of the loan. For the same reasons, more of your monthly payments will go toward principal sooner, and your home’s equity will increase at a much faster rate. In essence, it costs less to borrow the money.

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Jumbo Loans

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What is a Jumbo Loan? A jumbo loan is known as a “non-conforming” mortgage because it is for an amount that exceeds the conforming limits regulated by two federally sponsored enterprises. Beginning in 2018, the maximum conforming jumbo loan limit will be $453,100, in most markets throughout the US. However, in high-cost housing markets where home prices are above average, the limit is $679,650. Any loan amount higher than these numbers will require jumbo financing. The conforming loan regulations are set by Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corporation. In very simple terms, Fannie Mae and Freddie Mac are government-sponsored enterprises that buy or secure mortgages from lenders like investments. This helps make more money available to lenders they can then use to provide new loans to more borrowers. The regulations they establish are designed to create fairness to borrowers by establishing uniform mortgage documents and national standards for mortgages. The limits are based on average home prices. Jumbo loans are available for new home purchases and refinancing. Non-conforming jumbo loans are quite common. What makes them different from conforming loans is rather than meeting guidelines established by Freddie Mac and Freddie Mae, the lender sets the guidelines. These loans with a different set of guidelines, or requirements for getting one, are important because average home prices vary widely across the United States, within states, and even cities and communities. A $500,000 house in a small town in the Midwest could be quite extravagant. But a house for the same cost in parts of California could be quite modest. Many jumbo loan borrowers need this type of mortgage to buy large, expensive homes. But for others, this loan is used by a wider range of people looking for a mortgage in a housing market where the home prices are high, well above the local or national average. Just because the home prices on a jumbo loan are so high, that doesn’t necessarily mean the borrower is particularly wealthy. PrimeLending offers many different types of jumbo loans to meet the needs of all types of borrowers.

• We offer loans up to 95% of the home’s value that require as little as 5% down3
• Fixed-rate and adjustable-rate jumbo loans are available
• We can show you down payment assistance programs
• Some jumbo loan programs allow down payments in the form of a gift

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USDA Home Loans

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What is a USDA Home Loan? The USDA loan from PrimeLending is also known as the USDA Rural Development Guaranteed Housing Loan Program. Like the FHA, VA and other government-backed loans, it’s guaranteed by the U.S. Department of Agriculture. It was originally designed to provide a mortgage alternative to rural property buyers who had limited financing options. Today, as populations grow and suburbs expand, it’s not just a loan for farmers and rural property owners. It’s becoming a viable mortgage option for people who want to live away from cities and enjoy country living. The USDA Loan benefits No down payment: The USDA loan comes with 100% financing. You don’t need to make a down payment, which can often bea big obstacle for first-time homebuyers. Very low interest rates: Because the loan is guaranteed, PrimeLending offers a lower standard interest rate that is not tied to your credit score or down payment. Low monthly private mortgage insurance: As of October 1, 2016, the upfront mortgage insurance rate on a USDA loan is just 1%, with an annual fee of only 0.35%, the lowest numbers of virtually any mortgage financing program. The upfront fee can also be rolled into the loan, eliminating an out-of-pocket expense at closing. Flexible credit guidelines: Borrowers with lower credit scores or less than perfect credit history can often meet the program’s qualifying guidelines. USDA loan restrictions and eligibility requirements Eligible Geographic Areas: To get a USDA loan, the property you buy has to be in a USDA designated rural area, but it’s not all farm land. Almost 97% of the U.S. is eligible, which includes small towns and suburbs. The USDA Mortgage eligible area requirement map will show you all the areas where you can use this loan. Income limits: THE USDA loan was originally designed for low to moderate income earners. The program’s guidelines define income level as being up to 115% of the area’s median income. In many parts of the country, this can be quite generous. For lower income buyers, all of a household’s income is considered during the application process, which helps increase eligibility. This can include income from a child or other family member living in the house but who isn’t listed on the loan application. Length of the loan: The PrimeLending USDA loan is a 30-year fixed rate loan. One of the most common types of mortgage, with low and affordable monthly payments. Looking to live in a quiet part of the country, away from city noise and congestion? A USDA loan could be a great, affordable mortgage option. Contact a PrimeLending home loan expertto learn more.

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Veteran Loans

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VA Home Loans – A Valuable Benefit A VA home loan is a great benefit to military personnel during and after their service. PrimeLending understands the importance of a “home base” for military and their families and is proud to be able to help active and retired military use this product to meet their unique needs. VA home loans are partly guaranteed (typically a quarter of loan value) by the U.S. Department of Veterans Affairs and offers the following advantages:

• No down payment
• Higher loan value
• No private mortgage insurance
• Limit on closing costs
• Option for seller to pay closing costs
• No penalty fee for early payoffs
• Possible VA assistance if you have difficulty with payments

Who is Eligible? To obtain a VA home loan, an applicant must obtain a Certificate of Eligibility. VA Fixed Rate Home Loans A 30-year fixed rate option gives you a stable, predictable monthly payment. These loans are great for people settling down in one house over a long period of time. They give deployed soldiers a warm place to come home. A 15-year fixed-rate option could help current service members who would like to build equity more quickly. You pay more monthly, but this pace builds more equity in your home. VA Adjustable-Rate Mortgages The flexibility of an adjustable rate mortgage can be appealing to current military service members expecting to move in the next few years. ARM homeowners pay a low introductory interest rate for the first few years, then move or refinance before it adjusts upward. VA Jumbo Home Loan The VA will guarantee a maximum of 25% on your home loan up to the conforming loan limit of $453,100. For a loan greater than that amount a VA Jumbo Loan is needed. With a VA Jumbo Loan you can apply for a home up to $1,000,000 and will only need a down payment of 25% on the difference between $453,100 and the asking price of the home. For example, you want to purchase a home that costs $500,000. You would be required to pay 25% down on the amount over $453,100. $500,000 - $453,100 = $46,900. Then $46,900 x 25% = $11,725. This would be your down payment. This payment is still considerably lower than the 10% traditionally required for jumbo loans. Cash-Out Refinance Loans A cash-out refinance helps you handle big-ticket items – college, health expenses or debt, for example. Effectively, you pay off the remaining balance and take out a new loan for the appraised value of the house. Much of the difference goes into your pocket as cash. Interest Rate Reduction Refinance Loan (IRRRL) An Interest Rate Reduction Refinance Loan (IRRRL) helps service members refinance at a lower interest rate. Refinancing can help lower your monthly payment, change your term or turn an ARM into a fixed rate. Other advantages include:

• No appraisal or credit underwriting
• No Income and/or asset verification
• No out-of-pocket expenses
• Rolling all costs into the new loan
• No new COE - just validation of loan

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