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American Capital Mortgage Bankers Ltd.



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    Unless you plan on using your own money to purchase your home, you are most likely going to want to borrow money from a lender and spread payments to the loan out over a period time. With the advent of the Internet and a volatile mortgage market, there is a wide variety of loan options to choose from. As your representative in the process of buying your home, it is our responsibility to guide you down the best possible path throughout the process.



CHOOSING A LOAN                                                                                                   Back to Top

There are literally hundreds of lenders offering a multitude of loan options that makes determining the best loan for your situation a complex endeavor. Since you may be making payments on a loan anywhere from 15 years to 40 years depending on the term, it is imperative that you work closely with us in choosing the right lender and loan that works best for you. What follows is a breakdown of the generally available residential loan programs.

  • Fixed-rate loans
    This is a home loan with an ensured interest rate that will remain at a specific rate for the term of the loan. About 75 percent of all home mortgages have fixed rates. One reason for this is that most homes sold are to buyers who plan on living in their property for many years. When you choose the length of your repayment (usually 15, 20 or 30 years), keep in mind that while shorter term loans may have higher monthly payments, they also let you pay less interest and build equity faster.

  • 30-year fixed-rate loan
    The most popular loan is a 30-year fixed-rate loan. The reasons include:


    • It provides the borrower with reasonable monthly payments.

    • It's ideal for the homebuyer who plans on remaining in the home for more than 5 years.

  • 20-year fixed-rate loan
    The 20-year mortgage often offers a lower interest rate when compared to a 30-year loan. This loan amortizes principal and interest over a 20-year period, 10 years less than the traditional 30-year mortgage. This may save you a considerable amount of total interest when paid over the life of the loan.

  • 15-year fixed-rate loan
    The advantage of a 15-year mortgage is that its interest rate is generally lower than a 30-year or 20-year loan. Such a short-term loan will save you a significant amount of interest over the life of the loan. By paying off the loan in only fifteen years, you also build up equity in your home sooner. A 15-year loan allows you to own your home clear of debt much quicker when compared to longer term loans. This may be important if you are approaching retirement or have other large expenses to cover such as financing your children's education. However, the monthly payments you make on a 15-year loan will be significantly higher than those you make on a 30-year or a 20-year loan for the same loan amount.

  • Adjustable-rate loans
    With an adjustable-rate mortgage (ARM), the interest rate you pay is adjusted from time to time to keep it in line with changing market rates. This means that when interest rates go up, your monthly loan payment may go up as well. On the other hand, when interest rates go down, your monthly loan payment may also go down. ARMs are attractive because they may initially offer a lower interest rate than fixed-rate loans. Since the monthly payments on an ARM start out lower than those of a fixed-rate loan of the same amount, you should be able to qualify for a larger loan.

    The chief drawback, of course, is that your monthly payment may increase when interest rates go up. The types of people who typically benefit from an ARM are those that are planning to move or refinance in the near future, people with a high likelihood of increasing their income in later years, and people who need lower initial interest rates on their loans to be able to buy a home. How much your payment can increase will depend on the terms of your loan.

    Before applying for an ARM, be sure you know how high your monthly payment can go - the so-called 'worst-case scenario'. An ARM has two 'caps' or limits on how large an interest rate increase is permitted: One cap sets the most that your interest rate can go up during each adjustment period, and the other cap sets the maximum total amount of all interest adjustments over the life of the loan. The rates on an ARM usually change once or twice a year, and there is typically a lifetime rate cap (or limit) on both the amount of each individual rate adjustment, and the total amount the rate can change over the whole term of the loan.


    • Example: If your loan starts at 5 percent, has a 2 percent per-adjustment cap, and a lifetime adjustment cap of 4 percent, you know that your loan might go up to 7 percent the first time the rate changes. You also know that the rate can never go over 9 percent over the life of the loan (5 percent start + 4 percent lifetime cap). Only you can determine if you would feel comfortable paying this interest rate sometime in the future.

    Some ARMs offer a conversion feature which allows you to convert from an adjustable-rate to a fixed-rate loan at certain times during the life of your loan. Ask your lender about this feature when researching ARMs. One important thing to know when comparing ARMs is that the interest rate changes on an ARM are always tied to a financial index. A financial index is a published number or percentage, such as the average interest rate or yield on Treasury bills.

  • HELOC Loan

    • HELOC Loan: What is a Home Equity Line of Credit?
      A home equity line is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses. With a home equity line, you will be approved for a specific amount of credit -- your credit limit -- meaning the maximum amount you can borrow at any one time while you have the plan. Many lenders set the credit limit on a home equity line by taking a percentage (say 75%) of the appraised value of the home and subtracting the balance owed on the existing mortgage.


    • For example:
      Appraisal of home $100,000
      Percentage x 75%
      Percentage of appraised value $75,000
      Less existing loan - $40,000
      Potential credit line = $35,000

      In determining your actual credit line, the lender will also consider your ability to repay by looking at your income, debts, and other financial obligations, as well as your credit history.

      Home equity lines of credit often set a fixed time during which you can borrow money, such as 10 years. When this period is up, the plan may allow you to renew the credit line. But in a plan that does not allow renewals, you will not be able to borrow additional money once the time has expired. Some plans may call for payment in full of any outstanding balance. Others may permit you to repay over a fixed time, for example 10 years.

      Once approved for the home equity plan, usually you will be able to borrow up to your credit limit whenever you want. Typically, you will be able to draw on your line by using special checks. Under some plans, borrowers can use a credit card or other means to borrow money and make purchases using the line. However, there may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Some lenders also may require that you take an initial advance when you first set up the line.

      What Should You Look for When Shopping for a Plan?
      If you decide to apply for a home equity line, look for the plan that best meets your particular needs. Look carefully at the credit agreement and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs you'll pay to establish the plan. The disclosed APR will not reflect the closing costs and other fees and charges, so you'll need to compare these costs, as well as the APRs, among lenders.

      Interest Rate Charges and Plan Features.

      Home equity lines of credit typically involve variable interest rates rather than fixed rates. A variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspaper or a U.S. Treasury bill rate). The interest rate will change, mirroring fluctuations in the index. To figure the interest rate that you will pay, most lenders add a margin, such as 2 percentage points, to the index value. Because the cost of borrowing is tied directly to the index rate, it is important to find out what index and margin each lender uses, how often the index changes, and how high it has risen in the past.

      Sometimes lenders advertise a temporarily discounted rate for home equity lines -- a rate that is unusually low and often lasts only for an introductory period, such as six months.

      Variable rate plans secured by a dwelling must have a ceiling (or cap) on how high your interest rate can climb over the life of the plan. Some variable rate plans limit how much your payment may increase and also how low your interest rate may fall if interest rates drop. Some lenders may permit you to convert a variable rate to a fixed interest rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan.

      Agreements generally will permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable rate plans may not allow you to get additional funds during any period the interest rate reaches the cap.

      Costs to Obtain a Home Equity Line.

      Many of the costs in setting up a home equity line of credit are similar to those you pay when you buy a home. For example:

      A fee for a property appraisal, which estimates the value of your home.
      An application fee, which may not be refundable if you are turned down for credit.
      Up-front charges, such as one or more points (one point equals one percent of the credit limit).
      Other closing costs, which include fees for attorneys, title search, mortgage preparation and filing, property and title insurance, as well as taxes.
      Certain fees during the plan. For example, some plans impose yearly membership or maintenance fees.
      You also may be charged a transaction fee every time you draw on the credit line.

      You could find yourself paying hundreds of dollars to establish a home equity line of credit. If you were to draw only a small amount against your credit line, those charges and closing costs would substantially increase the cost of the funds borrowed. On the other hand, the lender's risk is lower than for other forms of credit because your home serves as collateral. Thus, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the initial costs of obtaining the line. In addition, some lenders may waive a portion or all of the closing costs.

      How Will You Repay Your Home Equity Line of Credit?
      Before entering into a plan, consider how you will pay back any money you might borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow) plus accrued interest. But, unlike the typical installment loan, the portion that goes toward principal may not be enough to repay the debt by the end of the term. Other plans may allow payments of interest only during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that entire sum when the plan ends.

      Are Payments Flexible?
      Regardless of the minimum payment required, you can pay more than the minimum, and many lenders may give you a choice of payment options. Consumers often will choose to pay down the principal regularly as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan.

      Whatever your payment arrangements during the life of the plan -- whether you pay some, a little, or none of the principal amount of the loan -- when the plan ends you may have to pay the entire balance owed, all at once. You must be prepared to make this balloon payment by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home.

      Can My Monthly Payment Change?
      With a variable rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10 percent interest rate, your initial payments would be $83 monthly. If the rate should rise over time to 15 percent, your payments will increase to $125 per month. Even with payments that cover interest plus some portion of the principal, there could be a similar increase in your monthly payment, unless the agreement calls for keeping payments level throughout the plan.

      What if I Sell My Home?
      When you sell your home, you probably will be required to pay off your home equity line in full. If you are likely to sell your house in the near future, consider whether it makes sense to pay the up-front costs of setting up an equity credit line. Also keep in mind that leasing your home may be prohibited under the terms of your home equity agreement.

      What is an APR?
      APR stands for annual percentage rate. It is the annualized cost of credit, expressed as a percentage. The APR calculation considers certain fees to reflect the cost of credit in addition to interest.

      What is LTV?
      LTV stands for loan-to-value, which is the ratio of the mortgage loan amount to the property's value. For example, if your property is worth $100,000 and $80,000 is owed on the first mortgage, the LTV ratio is 80.

CHOOSING A LENDERS                                                                                              Back to Top

  • Along with choosing a loan, you should consider the variety of sources for loans as they each offer advantages and disadvantages depending on the loan amount, the interest rate, your down payment amount, and much more. Major categories of mortgage lenders include:

    Savings & Loans
    Savings and Loan Associations (S&Ls) are the largest traditional lenders of residential home loans. They remain a major source of funding for home loans. S&Ls are often called Savings Banks in the Eastern U.S.

    Commercial Banks
    Commercial banks offer attractive loan terms, particularly if they evaluate their entire banking relationship with you. Some commercial banks have their own real estate lending departments and will service your loan. Other commercial banks sell their loans to Fannie Mae and Freddie Mac, two major government-sponsored enterprises (GSEs) that specialize in buying residential loans from lenders.

    Mortgage Bankers
    Mortgage bankers borrow money from banks or pools of investors, underwrite the loans, and sell them to investors for a profit. They often receive a fee from these investors for servicing your loan. Loan servicing includes collecting monthly payments, sending out loan statements, and collecting late payments.

    Mortgage Brokers
    Mortgage brokers circulate, or 'shop,' a loan application among lenders to find the most attractive terms for the borrower. In exchange, a lender pays the broker a fee.

    You may find that the current homeowner is willing to offer financing in exchange for selling the home. This means that the seller becomes your lender. A common means of financing is for the seller to accept a note. A note requires you to make monthly payments to the seller instead of a bank or other lender.

    Credit Unions
    Since credit unions are owned by their members, they are called cooperative financial institutions. Since they are nonprofit institutions, credit unions may offer attractive loan rates to their members. Like commercial mortgage lenders, credit unions sell their loans to Fannie Mae and Freddie Mac to maintain access to new sources of loan funds. The National Credit Union Administration (NCUA) regulates the credit union industry.

    When selecting a lender or broker to finance your new home, be sure to do your homework on the company or institution. As interest rates have continued to decline, more and more lenders have appeared in the industry. As rates begin to increase, more and more of these new lenders may go out of business. Always check to make sure your lender is qualified and has the resources to service your note for the life of the loan.


DEFERENT MORTGAGE LOAN CALCULATORS                                                          Back to Top

  • Affordability Calculator:   How much house can you afford with your income?  This calculator helps and is designed for those putting less than twenty percent down. 

  • Bi-Weekly Mortgage Calculator:  A bi-weekly mortgage is basically the same as making one extra mortgage payment a year.  This calculator tells you how quickly you would pay off your mortgage if you were making the payments once every two weeks instead of once a month.

  • Multi-Payment Calculator:  Allows you to calculate several different loans at once so you can compare payments.

  • PITI Calculator:  Adds taxes and insurance to your mortgage payment.  Useful because this is how your lender calculates your monthly housing costs to determine your qualifying ratios.  If you are impounding your loan, it helps you to know what your total monthly payment will be.

  • Principal After X Years:   Perhaps you plan to sell this home in five years and want to know what your mortgage balance will be at that time. 

  • Principal Prepayment Calculator:  This mortgage calculator tells you when your normal payoff would be and when it would be if you paid a specific extra amount each month.

  • Prepayment Analysis Calculator:  Suppose you want to pay off your mortgage in a specific period of time.  How much should you pay monthly to accomplish your goal?

  • Prepay Principal or Invest the Money?:  This calculator will help you make the decision on whether it makes more sense for you financially to pay down your mortgage or put some money away in financial investments of various kinds..

  • Payment Calculator 1:  Very easy to use and similar to what you've seen all over the web.

  • Payment Calculator 2 : Also easy to use, but different from the calculator above. 

  • Qualifying Calculator :  How much income does it take you to qualify for a particular home?  This calculator will tell you.  However, you may want to adjust the qualifying ratios to 33/38 or whatever your local lender recommends.

  • Rent vs. Own:  Rents have risen considerably recently.  This calculator helps to show what your net gain may be in owning rather than renting, taking many considerations into account.

  • Super Calculator:  This calculator does pretty much everything.  It calculates payments, debt-to-income qualifying ratios, your monthly PITI, shows how much you will save (or not) by refinancing, creates amortization tables, and more.


UNDERSTANDING CREDIT REPORTS                                                                          Back to Top

  • A credit report is a factual record of your credit payment history maintained by a credit bureau. It's provided to companies and individuals by credit bureaus for purposes permitted by law, usually to grant you credit.

    More than 205 million people in the United States have a credit card, car loan, mortgage, or student loan. Almost every one of them has a credit file. The information in your credit file is obtained directly from the companies you have credit with, as well as from government agencies such as the legal court systems. There are three major credit bureaus in the United States: Experian, TransUnion, and Equifax. Even though you are in good financial shape, there is a possibility of identity theft or just a simple error in credit reporting that might damage your credit file. The best way to track changes in your credit profile is to purchase a credit monitoring service. Usually the credit monitoring service includes a credit report and updates for 30 days.

    Your rights under the Fair Credit Reporting Act:

    You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.

    You have the right to know the name of anyone who received your credit report in the last year for most purposes, or in the last two years for employment purposes. Any company that denies your application for credit must supply the name and address of the Credit Reporting Agency (CRA) they contacted, provided the denial was based on information given by the CRA.

    You have the right to a free copy of your credit report when your application for credit is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.

    If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to investigate your dispute. You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

    Credit Reporting Agencies:

    Trans Union

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