80/15/5 – two mortgages with the loan amounts of the first being 80% of the property value, the second being 15% and a 5% down payment. This loan structure is often used when the borrower needs to borrower more than 80% and wants to avoid buying Private Mortgage Insurance. Depend on the borrowers financial situation, a loan officer can structure an 80/10/10, 80/20, or any combination thereof.

Another alternative is talk to us about loans which do not require PMI mortgage insurance even above 80% which may be available in your county.

A mortgage with no PMI may have a higher interest rate than a mortgage with PMI. It is good to compare the two payments to see which one will benefit you.

These so-called piggyback loans typically require good credit and fairly low non-mortgage debt in order to qualify for the second mortgage.

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The adjustable rate mortgage or ARM is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. The index could be for example the one year treasury, CD rates or even cost of funds as measured in a defined geographical area. Also referred to as the variable rate mortgage.

An adjustable rate mortgage or variable rate mortgage is a loan secured on a property whose interest rate and monthly repayment vary over time.

I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation. Please read more valuable information and when you feel comfortable I would like you to contact me.

Adjustable rate mortgages that have a fixed periods for 3, 5, 7, or 10 years are often called Hybrids. They adjust after the fixed period ends.

Hybrid programs are an excellent way to keep your payment lower if you plan to refinance or sell the home in just a few years.

The interest rate on ARM’s are made up of two components, the index and the margin. When choosing between different ARM programs, it is prudent to understand the volatility of the underlying indices as well as the margins.

An adjustable rate mortgage, also known as an ARM, is a mortgage with an interest rate that is linked to an economic index. The interest rate, and your payments, are periodically adjusted up or down as the index changes. Ask a Mortgage Professional if an ARM is right for you?

Editors Note: Due to the mortgage and credit crunch, 100% financing may no longer be available. If you’re in need of a mortgage in Denver, we can discuss your mortgage situation.

If you have money saved for a down payment it may not be needed. There are several advantages to taking the 100% financing, and saving your down payment. The 100% financing has become increasingly more popular and easier to obtain.

From a purely financial viewpoint, when you purchase a property with 100 per cent financing you are minimizing your financial risk and shifting almost all of the risk to the lender. This concept has become very popular, especially with investors who are always looking to minimize their exposure to risk.

As home prices have risen, and so have rents. Often, you can buy a home with 100% financing with a monthly payment that is the same or only slightly higher than your current rent. When you calculate your income tax savings from your mortgage interest deduction, buying can cost less than renting. In addition, if you get a fixed rate mortgage, your monthly principal and interest payment is locked in for the life of the loan. Your rent, however, will increase 3% to 5% annually based on national averages.

100% financing allows you to move into a home without the stress or difficulty of supplying the down payment. You also will begin to earn equity in your new home.

We don’t think that saving for a down payment should be the reason you put your dreams on hold. We can help you buy your dream home with a zero down mortgage loan. You’ll not only be able to afford a home sooner, you’ll probably be able to afford more homes. With a zero down mortgage, the amount of loan you can qualify for is determined by your ability to make your monthly payments rather than how large a down payment you’ve saved. And, for most buyers, this means qualifying for a larger loan.

If you plan on using 100% Financing you need to be absolutely certain your new home will hold its value or appreciate. Even a small decrease in value can leave you “under water”, or owning more than your home is worth.

By using 100% financing, you can keep your money earning interest in your savings account or money market fund. You can also gain a higher tax deduction for interest paid on the loan.

By financing your home with zero money down using 100 percent financing you will be able to hold onto your money instead of tying it up into the equity of your home. This way you will be able to hold onto your money and put it away in a savings account, investment account, or any other type of account to hold onto for a “rainy day”. Sometimes, unfortunate events arise and you are required to utilize some of your savings. If this money is tied up in the equity of your home, you may not be able to get it out very easily or you may have very unfavorable terms to access the money. However, if you were to keep this money in your savings account, the money would be accessible instantly. Therefore, always try to make sure that you have some savings put away somewhere and don’t tie up every penny you have into the equity of your home.

100 percent financing can be beneficial to any borrower no matter how much money they have in savings. Instead of putting your money towards your home, make an investment that has a higher rate of return than the amount of interest that you are paying on your home, this way you are creating positive cash flow. With 100% financing you gain the same amount of equity if your home appreciates in value as you would by purchasing a home with a 20% down payment

Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

The APR does NOT affect your monthly payments. Your monthly payments are a function of the interest rate and the length of the loan.

The APR of a 30 year fixed rate loan, will be different than the APR of a 15 year fixed rate loan. Also, ask for the Good Faith Estimate (GFE), to compare the different costs associated with your loan. APR is just one factor in determining which loan is best for you. Remember that your APR DOES NOT affect your monthly mortgage payments. Your monthly payments are based on the interest rate, and the length of the loan.

The APR is also defined as the cost of credit to the borrower in relation to the amount borrowed expressed as a yearly rate. This is required by the federal Truth in Lending Act, Regulation Z.

The APR is found on the Truth In Lending, a disclosure form that is required by law to be given to potential borrowers. Because the APR takes into considerations all the bank fees a lender charges, it is a good tool to compare different loan offers. For instance, one bank offers a borrower a mortgage loan with an interest rate of 6.25% with 1 discount point (meaning the borrower pays the bank 1% of the loan amount at closing in order to get the 6.25% interest rate), and another offers a loan with 6.5% interest rate and 0 point, how would the borrower know which to choose? Without consideration to the borrower’s financial situation such as his cash reserves and how long he intends to live at the property, the loan with the lower APR is the better choice.

In other words the APR is the TRUE cost of the loan.

A good tool to compare loans across different lenders is the Annual Percentage Rate (APR). The Federal Truth in Lending law requires mortgage companies to disclose the APR when they advertise a rate. It is designed to represent the true cost of the loan to the borrower, expressed in the form of a yearly rate. The purpose is to prevent lenders from hiding fees and up front costs behind low advertised interest rates

For an adjustable-rate loan, the APR assumes the loan’s index doesn’t change from its initial value.

A document that gives an estimate of a properties fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

You probably have an opinion of the value of your home. Your opinion and a professional appraiser’s opinion may be the same. But appraisers are required to be objective and impartial in their analyses and opinions. A professional appraiser has been trained in appraisal methodology and looks at how your home compares with sales and listings of homes similar to yours, considers many factors such as price trends and proximity to a freeway, complies with professional standards, and usually completes a written report.

It is important to note the appraisal process and inspection for FHA and VA loans in particular may be significantly more rigorous than a conventional mortgage.

An appraisal when completed is good to keep on hand even after the intended transaction is complete. For example, after getting an appraisal for a refinance transaction, this same appraisal may come in handy to give you a point of reference should you wish to sell the property at a future date.

A fee is paid to an appraiser, who is qualified by education, training, and experience to estimate the value of real and personal property. Appraisers usually charge one fee for a single-family home and slightly higher fees for a two-family, three-family, or four-family home.

Appraisals are much more likely to come in under the expected value in a re-finance transaction than in a purchase transaction. Simply because homeowners often unrealistically over estimate the value of their homes.

Even though the borrower pays for the cost of the appraisal report, it is in the name of the lender bank or mortgage broker. By law, borrowers have the right to receive a copy of the Appraisal Report. In fact, lending institutions are required to disclose to the borrowers that they have this right.

The fair market value that is determined by the appraisal is not just what an evaluation of what your house is worth, but what a potential buyer in that market would be willing to pay for the property.

Although appraisals rarely come in under the purchase price, it happens. What are the implications of a low appraised value? For one, the buyer overpaid, at least in the eyes of the appraiser. An appraisal is nothing more than just the appraiser’s professional opinion on the “fair market value” of the subject home. The “fair market value” of a home is subjective. What it’s worth to one buyer is often not worth as much to another (otherwise the first buyer would have been overbid). In a purchase transaction, the buyer often uses the low appraisal value as leverage to negotiate a lower purchase price. Unless being in an overheated real estate market where the seller is certain he will find another buyer, the seller would often agree to a lower price for fear of not finding another buyer in a short time, and the recurrence of a lower appraisal value with any subsequent buyers. Another possibility the appraised value may come under the purchase price is that the appraiser may not be familiar with the neighborhood. This happens most often when the bulk of the appraiser’s work is not in the same vicinity of the subject home, or that the subject property is located in a rural area when there are no usable comparable sales. If a home buyer believes this is the case, he should request a copy of the appraisal report from the lender, check the comparable properties chosen and determine whether they are valid comparable.

There are several kinds of appraisals including an Automated Valuation Model, a Full Interior and Exterior Appraisal, and a Limited Exterior Appraisal. Some loans such as home equity loans under $100,000 don’t require a full appraisal, while home loans over $2 million will require two full appraisals.

Costs for appraisals can vary depending on which company is used. Sometimes the cost can be inclusive in the loan fees and other times it will need to be paid when the appraiser comes out to the home. In any event, the appraisal evaluation is one of the key components in what loan amount each individual borrower will qualify for.

The appraisal in not to be confused with the home inspection. While an appraisal is completed for the value of the home alone, the inspection is performed to uncover potential problems that may be present in the home. It’s very important to have both done on the property.

An appraisal is a report that provides an opinion of value of the subject property and supports that opinion with the utilization of 3 approaches: a comparable sales approach, a cost approach, and an income approach. The appraisal is completed on a standardized Uniform Residential Appraisal Report form called a 1004 form.

Appraisals are used by lending institutions to make a decision of whether to lend on that particular property. The appraisal report will outline any apparent problems or hazards with a home.

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A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Appraiser will use two common methods when conducting an appraisal of a residential property: In the Sales comparison method the appraiser estimates a subject property’s market value by comparing it to similar properties that have sold in the area. The properties used are called comparable, or comps. No two properties are exactly alike, so the appraiser must compare the comps to the subject property, making paperwork adjustments to the comps in order to make their features more in-line with the subject property’s. The result is a figure that shows what each comp would have sold for if it had the same components as the subject. The cost approach is most useful for new properties, where the costs to build are known. The appraiser estimates how much it would cost to replace the structure if it were destroyed.

Appraisers should be chosen based on their experience with a particular area. Appraisers familiar with an area will give home values closest to the true value. This will help prevent artificially home value increases due to skewed purchase prices thereby lessening a chance of market corrections in the future. Downward market corrections hurt buyers that purchased homes at artificially high prices because of incorrect appraisals. The homeowner may end up owing more for their home than what it is worth which will make it difficult to sell their home.

Your lender will require an appraisal when you ask to use a home or other real estate as security for a loan, because it wants to make sure that the property will sell for at least the amount of money it is lending.

Some lenders require the appraisal to be performed only by appraisers who are on that lender’s approved list. Other lenders will accept an appraisal from any licensed appraiser except ones who are on that particular lender’s unacceptable list. This is one of many reasons that you should always be working with an experienced mortgage professional who will make sure that the proper appraiser is selected.

While the use of an appraiser is the traditional method lenders use to assess the value of a house, many lenders are turning to newer methods of property valuation to validate the traditional physical appraisal. The primary such method is an ‘AVM’, which stands for “Automated Valuation Model”. An AVM is a statistical model that compares your property, or the property you are buying, to a model of home prices in your area. Since an AVM cannot physically assess the property by visiting it, a lender will often perform an AVM and then arrange for an appraiser to conduct a simple ‘drive-by’ appraisal. The main logic for using an AVM is that it provides a much broader basis for comparison of property values and trends in a given market and region, and can often begin factoring in softening market conditions, or even a market downturn, months before a traditional appraisal will reflect these changes. A few lenders will not even order a standard appraisal if the AVM clearly supports the purchase price, or refinance value.

An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

Borrowers are entitled to a copy of the finished appraisal, but the appraisal still belongs to the mortgage broker that ordered the appraisal. If a borrower wishes to change mortgage brokers after an appraisal has been completed the new broker must order a new appraisal in their name.

And remember that the appraiser doesn’t want to buy your house. He or she will say what the house is worth clean and tidy and in reasonable repair, even if you have some dirty laundry on the laundry room floor or dirty dishes in the sink. Cleaning doesn’t get you a higher appraisal! Letting the appraiser in as soon as possible gets you a loan faster, though.

The appraiser is responsible for figuring out the estimate of the homes value. They typically will come out to your house and take pictures, measurements, gather other data, as well as find houses similar to yours that are close by (which are called comparables). Once the appraiser has all the information that they need, then they will put together the appraisal.

An appraiser is a licensed individual that provides the appraisal. When looking for an appraiser, make sure that they are licensed with the state that your home is in.

Appraisers do not just “make up” a value for a home. They take many situations into account. Including the current real estate market conditions in your area.

An appraisal value is only the educated opinion of a licensed appraiser. Due to different appraisers using different comparable homes in the appraisal process, appraisers can come to different appraisal values on the same home. However, the difference in value should be very small.

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The term Appreciation as applied to homes and mortgages refers to an increase in the value of a property.

Let’s look at some numbers to put this in perspective and show you why appreciation makes real estate such a good investment. Take a 200K home bought for full value with an appreciation rate of just 5% per year. Year 1 – 200,000Year 2 – 210,000Year 3 – 220,500Year 4 – 231,525Year 5 – 243,101Now is it starting to sink in why appreciation is a key factor in Real Estate?

You may realize appreciation on a property due to a positive improvement in the property, the area, or the removal of another negative factor.

Appreciation is the increase in value of your home. This is one of the many benefits of home ownership. Many homes have seen double digit appreciation in the last several years.

Commonly, and incorrectly, used to describe an increase in value due to inflation.

One major misconception that many homeowners/consumers have is that appreciation represents some type of monetary performance of the equity in their home. Appreciation takes place whether a homeowner has 0 equity or $200,000 in equity. The appreciation is obtained from increased market value of the property. The equity, when trapped in the home is “lazy” – meaning it is not a performing asset.

Many of the savviest real estate investors know that the key to building their fortunes by using the equity in their homes as the foundation is to separate the equity from the home at a good valuation, and use this substantial liquidity, which is often borrowed at a fraction of the market rate of return in alternative asset classes, to invest in equities, commercial real estate, and most profitably in their own small businesses, yielding a substantially higher return than the nominal interest rate on the money they’ve cashed out of the home. This is a trick copied from big business and can be the cornerstone of a powerful wealth building strategy for homeowners who aspire to financial freedom.

The rate of appreciation differs depending on the area some areas appreciate faster than others but given time your home will go up in value.

If you feel that your home has appreciated a good amount, you should consider refinancing your current mortgage to get money out, or to get more favorable mortgage terms.

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The simple answer is that no, automated valuation models (AVM) are not always accurate. The only way you can get an accurate estimation of value is if you hire a licensed appraiser to give their opinion.

AVM’s, or Automated Valuation Models, can be used as a guide to give a person an idea as to how much a home may be worth. Sometimes these can be fairly accurate, however most of the time these models are not very accurate. Without someone actually going out to ones home and physically inspecting the property there is no way to provide an accurate estimate as to how much your home is worth. You may have the nicest house in the area and this may make your home worth a little more than everything else in your neighborhood. On the other hand you may have the worst house in the area and your home may not be worth as much as any other house around you. Actual appraisals make adjustments for all kinds of things. If you have a pool, a huge stamped concrete patio, added an addition that does not show up in the county records, lost part of your home to a fire, etc…. these items will have an impact on the final value of your home, good or bad. Therefore, without actually having someone come out to your home there is no accurate way to provide an estimate as to how much your home is worth.

The accuracy of an AVM depends greatly on the density of the homes in your neighborhood and the number of recent sales. If you are in a rural area or if your home is particularly unique then do not count on an AVM to be very accurate.

Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.

If you are currently in the tail end of the fixed period in your Adjustable rate loan, often 2 years, 3 years or 5 years after you took it out, this may be the best time to get a fixed rate mortgage refinance and lock in your rate while it is low. While mortgage rates rise and fall, the current market outlook is that they will continue to increase over the next couple of years, and you don’t want to be stuck paying a lot more money for a couple of years when you have the opportunity to refinance ARM into fixed rate mortgage today.

There are many Adjustable Rate Mortgage products available today. Some ARM products have rates that adjust immediately the following month after settlement, others have an initial fixed rate period of 1, 3, 5, 7, or 10 year. ARM that has an initial fixed interest rate period is also known as Hybrid Loans.

When choosing an ARM product, it is as important to consider the underlying indices and margins as picking the lowest teaser rates. Different indices have different sensitivity to the interest market. In other words, some indices such as Treasury bills and LIBOR are highly sensitive to market conditions and adjust rapidly. The 11th District Cost of Funds Index, also known as COFI, tends to move slower in comparison and therefore less volatile.

ARM products almost always have an initial interest rate that is lower than that of fixed rate products of the same loan term. These lower starting rates, also refereed to as Teaser Rates, are meant to induce/reward borrowers who are willing to bear some of the risks of future interest rate movements.

ARM’s are great for keeping your payment down for a fixed period of time while you work on your FICO score and aim for a better fixed rate down the road.

Some ARM loans have an interest only option. These loans are very popular with people who do not plan on staying in the home for a long period, want to qualify for a larger home and investment properties to increase cash flow due to the lower payments.

Other ARM product features that need to be considered include the Period Adjustment Caps which limits the maximum rate change allowed at an given adjustment, the Floor, which is the lowest possible rate of the loan, regardless of the value of the underlying index, and the Life Time Cap, which sets a ceiling for the maximum rate of interest throughout the life of the loan.

An ARM, short for “adjustable rate mortgage”, is a mortgage on which the interest rate is not fixed for the entire life of the loan. The rate is fixed for a period at the beginning, called the “initial rate period”, but after that it may change based on movements in an interest rate index. The ARM rate quoted by a lender or broker is the initial rate. It holds until the end of the fixed-rate period, which can last from a month to 10 years. This rate is critically important if the initial rate period lasts for 10 years, but it is very unimportant if the period is only one month. On the most popular ARM program, the initial rate period is 12 months, and on more than half the period is 36 months or less. While you can always opt for an ARM with a longer initial rate period, the rate goes up as the period lengthens. If you need the rate on a one-year ARM to qualify, you must consider very carefully what happens after the fixed-rate period ends.

An adjustable-rate mortgage (ARM) with an initial fixed-rate period of pre-determined years, during which the borrower is may have an option to pay only the interest accrued on the loan. The interest rate then adjusts annually or bi-annually, based on the indexes such London Inter-Bank Offered Rate (LIBOR) index, and can move up or down as market conditions change.

ARMS have caps so the borrower is protected by a maximum adjustment the lender can make over the term of the loan. This information should be clearly identified in the Truth in Lending statement (TIL) which should be given with the Good Faith Estimate (GFE).

ARM loans come with different initial fixed rate periods such as 1 2 3 or 5 year fixed. After the initial period they will start to adjust according to the index they are tied to. What’s nice about ARM loans is it allows the borrower to have a lower payment initially. These type programs can be used for many reasons, one of them being for someone who won’t be living in a property for an extended period of time.

Is the ARM right for you? I can understand how the ARM can be confusing and I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation. Please read more valuable information and when you feel comfortable I would like you to contact me.

The initial interest rate for an ARM is lower than that of a fixed rate mortgage, where the interest rate remains the same during the life of the loan. A lower rate means lower payments, which might help you qualify for a larger loan. There’s couple of questions that is very important when considering the ARM like; How long do you plan to own the house? The possibility of rate increases isn’t as much of a factor if you plan to sell the home within a few years. Do you expect your income to increase? If so, the extra funds might cover the higher payments that result from rate increases. Some ARMs can be converted to a fixed-rate mortgage. However, conversion fees could be high enough to take away all of the savings you saw with the initial lower rate.

An adjustable rate mortgage, called an ARM for short, is a mortgage with an interest rate that is linked to an economic index. The interest rate, and your payments, are periodically adjusted up or down as the index changes.

If you are considering an adjustable rate mortgage, make sure you do the research. Find out how often the rates can increase and by how much. Try to determine whether you can afford payments if the rates go up significantly over the next few years.

“American consumers might benefit if lenders provided greater mortgage-product alternatives to the traditional fixed-rate mortgage,…To the degree that households are driven by fears of payment shocks, but are willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”- Alan Greenspan, the Chairman of the Federal Reserve Board at the Credit Union National Association 2004 Governmental Affairs Conference

Most lenders tie ARM interest rate changes to changes in an “index rate.” These indexes usually go up and down with the general movement of interest rates. If the index rate moves up, so does your mortgage rate in most circumstances, and you will probably have to make higher monthly payments. On the other hand, if the index rate goes down your monthly payment may go down. Lenders base ARM rates on a variety of indexes. Among the most common are the rates on one-, three-, or five-year Treasury securities. Another common index is the national or regional average cost of funds to savings and loan associations. A few lenders use their own cost of funds, over which–unlike other indexes–they have some control. You should ask what index will be used and how often it changes. Also ask how it has behaved in the past and where it is published.

Adjustable rate mortgages or ARMs have Interest Rate Caps. Rate caps limit how much interest you can be charged over a period or over the life of a loan. – A Periodic rate cap limits the amount by which your interest rate may increase at the adjustment period(s). Only some ARMs have these period caps.- Overall or lifetime rate caps limit how much rate can change over the life of the loan. Lifetime or overall caps are required by law and have been required by law since 1987 on all Adjustable rate mortgages.

ADJUSTABLE-RATE MORTGAGE (ARM)A mortgage loan where the interest rate is not fixed for the entire term of the loan, and can change during the life of the loan in line with movements of an index rate.

If your ARM has started to adjust, it might be a good idea to refinance into a fixed rate loan.

2/28 ARM is a great product. Especially for 1st time home buyer or subprime borrower. Allows them to strengthen credit over the two year period.

An Adjustable Rate Mortgage (ARM), will carry a lower initial interest rate than a typical 30 year fixed rate mortgage. The lender is hoping that you will forget about the adjustment, and just continue to hold on to the loan. Be aware of when your loan is due to adjust, as well as by how much it will adjust.

If one or more of these situations describes you, an ARM might be a good fit: -You plan to stay in your home for a relatively short period of time -You want lower initial monthly payments and can handle potential payment increases in the future -You want to qualify for a larger mortgage amount, and you expect your income to go up over time

It has been shown, that home owners would have saved thousands of dollars if they had a ARM of a conventional 30 year fixed.

When should you take an ARM mortgage vs. a traditional 30 year fixed? Consider how long you plan on occupying the property. If it is for 10 years or more then a 30 year fixed may be the best bet when interest rates are low. However, if you plan on moving sooner then consider the extra savings you will achieve by choosing an ARM. For example, you plan moving when your child is old enough to go to school in three years. The best financial choice would to get a 3 year or possibly a 5 year ARM. When a 30 year fixed mortgage is around 5.875% a 5 year ARM is around 5.25% and a 3 year ARM would be about 5.00%. On a $200,000 loan the monthly payments would be $1183 for a 30 year, $1104 for a 5 year ARM, and $1073 for a 3 year ARM. Times that by 3 years, 36 months, and your savings for an ARM vs. a 30 year fixed would be between $2800 – $3900. Money better spent elsewhere.

If you only plan on living in your home for a few more years, it might not be worth it to move from a program like a low rate ARM or an Interest Only Program to a traditional Fixed Rate loan. There may be better things to put your money towards each month that putting a few extra dollars towards the principal of your home.