Mortgage Products & Your Choice
We appreciate your interest in a mortgage loan with us. We would like to explain some terms and the major features of our two basic products we offer to help in your choice.
First, we take loan applications on mortgage loans in which we make the loan decisions, originate in our name, and you make payments to us. Sometimes, you will hear a lender reference these loans as “in-house” mortgages. Secondly, we also take mortgage loan applications in which we sell to other lenders or mortgage-related companies, usually soon after the loan is closed, to whom you will make your mortgage payments. Sometimes you will hear lenders refer to these loans as “secondary market loans,” because these loans are eventually sold or transferred by lenders in a financial marketplace of mortgages. Even if your loan is sold in the future, or you make your payment to a different lender, the terms of your loan terms cannot change from the original contract (“Note”).
Your choice of mortgage products and your decision should be dictated on what features suit your needs and financial circumstances, and on which loans you can afford and qualify. Your consideration might include issues such as how much payment can you afford, how much a down-payment will and loan closing costs be, or how long you intend to own the property.
Although our lenders cannot make the decision for you, they will help explain the types of loans available to you for your decision.
Other than the rates and fees of these two mortgage types, below are the basic features of both types of loans and how they compare or contrast. Please do not hesitate to ask us any questions about the features of our loans and services to help you in your choice.
Loans Originated “In-House”
Loans Sold To Other Lenders Or Mortgage-Related Companies
● The Bank makes the decision to approve your loan application.
● You make your payments to the Bank.
● Adjustable rate mortgages are typically offered by the Bank. Adjustable rate mortgages are loans in which the interest rate will not change for a set period of time, 1 to 5 years for instance, and then the interest rate and payment can change periodically, again every 1 to 5 years for instance. Any periodic change in the interest rate and payment will be based on a margin plus an index that is typically The Wall Street Journal's "Prime Rate." These loans have rate caps for each period and over the life of the loan to avoid large jumps in payment. We can provide documents that explain any adjustable rate mortgage we offer of which you have an interest. Fixed interest rates may be offered from time to time, more often in the form of a “balloon” mortgage loan. This is typically a relatively short-term loan, such as 5 to 7 years, in which the payments are based on a long-term amortization so they are more affordable (payments based on a term, for instance, of 10 year to 20 years). The term “amortization” basically means paying off a debt in regular installments over a period of time. At the end of a "balloon" mortgage's term, the loan balance must be paid, of which you would likely need to seek additional financing if you could not pay the balance of the loan from your personal funds.
● The ratio of the loan amount to the value of the property being used a collateral is not as high as on loans sold to investors or banks.
● There is no private mortgage insurance or cost involved that partially insures lenders for default of loan payments with a high ratio of loan amount compared to the value of the property.
● Amounts will be added to your payment to pay for annual charges of insurance and taxes on the property, termed “escrowing” funds, on first mortgage loans.
● The decision to approve the loan application is undertaken by the lender or mortgage-related company to whom the loan will be sold. You make your payments to another institution.
● Mortgages are available in which interest rates are fixed and do not change, with monthly payments from, for instance 5 to 30 years that do not “balloon.” Adjustable rate mortgages are also offered with longer terms than “in house” loans. Adjustable rate mortgages are offered in which the interest rate will not change for a set period of time, 1 to 5 years for instance, and then the interest rate and payment can change periodically, again every 1 to 5 years for instance. Any periodic change in the interest rate and payment will be based on a margin plus an index, typically based on changes in Treasury Bill rates. These loans have rate caps for each period and over the life of the loan to avoid large jumps in payment. We can provide documents that explain any adjustable rate mortgage we offer of which you have an interest.
● There might be a minimum loan amount.
● The ratio of the loan amount to the value of the property being used as collateral can be higher than “in-house” mortgage loans.
● Private mortgage insurance is often required involving loans with a high ratio of the loan amount compared to the value of the property, usually if that ratio is over 80%. This type of insurance doesn't insure you, but insures the lender incase there is a default on the loan. Government-sponsored loans might also include mortgage insurance payments or fees.
● Amounts will be added, or “escrowed,” to the payment to pay for annual charges of insurance and taxes on the property, plus private mortgage insurance if applicable.
● There are often various interest rates from which to choose, sometimes based on an amount of “discount points” an applicant may wish to pay for a lower rate (an additional fee based on percentage of the loan).
● Interest rates can be “locked” for a period of time to avoid any potential increases during the application process, usually for or fee but is sometimes reimbursed if the loan is closed within the period of the “lock.”