Crown Financial Mortgage

Home

Products

About Us

FAQ

Choosing a Loan Program There isn't a single or simple answer to this question. The right type of mortgage for you depends on many different factors: Your current financial picture How you expect your finances to change How long you intend to keep your house How comfortable you are with your mortgage payment changing? For example, a 15-year fixed rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. An adjustable rate mortgage may get you started with a lower monthly payment than a fixed rate mortgage, but your payments could get higher when the interest rate changes. The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences frankly with a mortgage professional. Conventional and Jumbo Loans Conventional loans are secured by government sponsored entities or GSEs such as Fannie Mae and Freddie Mac. Conventional loans can be made to purchase or refinance homes with first and second mortgages on single family to four family homes. In general, Fannie Mae and Freddie Mac's single family, first mortgage loan limit is $417,000 in 2008. This limit is reviewed annually and, if needed, changed to reflect changes in the national average price for single family homes. The current loan limit applies to all conventional mortgages delivered after January 1, 2008. 2008 Conventional Loan Limits First mortgages One-family loans: $417,000 Two-family loans: $533,850 Three-family loans: $645,300 Four-family loans: $801,950 Loans which are larger than the limits set by Fannie Mae and Freddie Mac are called jumbo loans. Because jumbo loans are not funded by these government sponsored entities, they usually carry a higher interest rate and some additional underwriting requirements. A strategy to lower your overall interest payments if your purchase or refinance balance is above $417,000 is to use a combination of both first and second trust money, referred to as an 80/10/10, 80/15/5 or 80/20. Every situation is different, but it is one more option to consider. <?xml:namespace prefix = o /> In addition to common loan structures such as fixed rate, adjustable rate and balloon loans, Fannie Mae and Freddie Mac also have loan programs for low to no down payments, community lending and affordable housing initiatives, construction to permanent, home improvement and reverse mortgages. VA Loans<?xml:namespace prefix = o /><?xml:namespace prefix = o /><?xml:namespace prefix = o /><?xml:namespace prefix = o /> More than 29 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement. Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans The most important consideration is that no down payment is required in most cases. Loan maximum may be up to 100 percent of the VA established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $417,000. Flexibility of negotiating interest rates with the lender. No monthly mortgage insurance premium to pay. Limitation on buyer's closing costs. An appraisal which informs you of the property’s value. Thirty year loans with a choice of repayment plans: Traditional fixed payment (constant principal and interest; increases or decreases may be expected in property taxes and homeowner's insurance coverage); Graduated Payment Mortgage - GPM (low initial payments which gradually rise to a level payment starting in the sixth year); and In some areas, Growing Equity Mortgages - GEM (gradually increasing payments with all of the increase applied to principal, resulting in an early payoff of the loan). For most loans for new houses, construction is inspected at appropriate stages to ensure compliance with the approved plans, and a 1-year warranty is required from the builder that the house is built in conformity with the approved plans and specifications. In those cases where the builder provides an acceptable 10-year warranty plan, only a final inspection may be required. An assumable mortgage, subject to VA approval of the assumer's credit. Right to prepay loan without penalty. VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties. FHA Loans FHA's mortgage insurance programs help low and moderate income families become homeowners by lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages mortgage companies to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by protecting the mortgage company against loan default on mortgages for properties that meet certain minimum requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities. Section 203(b) is the centerpiece of FHA's single family insurance programs. It is the successor of the program that helped save homeowners from default in the 1930s, that helped open the suburbs for returning veterans in the 1940s and 1950s, and that helped shape the modern mortgage finance system. Today, FHA One to Four Family Mortgage Insurance is still an important tool through which the Federal Government expands home ownership opportunities for first time homebuyers and other borrowers who would not otherwise qualify for conventional loans on affordable terms, as well as for those who live in under served areas where mortgages may be harder to get. In 1997, FHA insured more than 790,000 homes, valued at almost $60 billion, under this program. FHA currently insures a total of about 7 million loans valued at nearly $400 billion. These obligations are protected by FHA's Mutual Mortgage Insurance Fund, which is sustained entirely by borrower premiums. Section 203(b) has several important features: Downpayment requirements can be low. In contrast to conventional mortgage products, which frequently require down payments of 10 percent or more of the purchase price of the home, single family mortgages insured by FHA under Section 203(b) make it possible to reduce down payments to as little as 3 percent. This is because FHA insurance allows borrowers to finance approximately 97 percent of the value of their home purchase through their mortgage, in some cases. Many closing costs can be financed. With most conventional loans, the borrower must pay, at the time of purchase, closing costs (the many fees and charges associated with buying a home) equivalent to 2-3 percent of the price of the home. This program allows the borrower to finance many of these charges, thus reducing the up front cost of buying a home. FHA mortgage insurance is not free: borrowers pay an up front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment. Down payment gifts for FHA loans. The down payment for an FHA mortgage can be 100% gift funds. This is one of the key benefits to the FHA program. Verification of the source of gift money is not required. However, it is necessary that the gift funds be deposited in the borrower's bank or savings account, or in an escrow account, prior to underwriting approval. Proof of deposit is required. Gift donors are restricted primarily to a relative of the borrower. They can also be certain organizations, such as a labor union or charitable organization. Contact your mortgage broker for complete information. Loan Limits for most Florida Counties for 2008 One Unit $271,050 Two Unit $347,000 Three Unit $419,400 Four-Unit $521,250 Fixed Rate Mortgages The most common type of mortgage program where your monthly payments for interest and principal never change. Property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable. Fixed rate mortgages are available for 30 years, 20 years, 15 years and even 10 years. There are also "biweekly" mortgages, which shorten the loan by calling for half the monthly payment every two weeks. (Since there are 52 weeks in a year, you make 26 payments, or 13 "months" worth, every year.) Fixed rate fully amortizing loans have two distinct features. First, the interest rate remains fixed for the life of the loan. Secondly, the payments remain level for the life of the loan and are structured to repay the loan at the end of the loan term. The most common fixed rate loans are 15 year and 30 year mortgages. During the early amortization period, a large percentage of the monthly payment is used for paying the interest. As the loan is paid down, more of the monthly payment is applied to principal. A typical 30 year fixed rate mortgage takes 22.5 years of level payments to pay half of the original loan amount. Adjustable Rate Mortgages (ARMs) These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home. However, the interest rate changes at specified intervals (for example, every year) depending on changing market conditions; if interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down, your mortgage payment will drop also. There are also mortgages that combine aspects of fixed and adjustable rate mortgages - starting at a low fixed rate for seven to ten years, for example, then adjusting to market conditions. Ask your mortgage professional about these and other special kinds of mortgages that fit your specific financial situation. Common ARM Indexes Cost of Funds Index (COFI) The 11th District Cost of Funds is more prevalent in the West and the 1-Year Treasury Security is more prevalent in the East. Buyers prefer the slowly moving 11th District Cost of Funds and investors prefer the 1-Year Treasury Security. The monthly weighted average 11th District has been published by the Federal Home Loan Bank of <?xml:namespace prefix = st1 /><?xml:namespace prefix = st1 /><?xml:namespace prefix = st1 />San Francisco since August 1981. Currently more than one half of the savings institutions loans made in California are tied to the 11th District Cost of Funds (COFI) index.<?xml:namespace prefix = st1 /><?xml:namespace prefix = st1 /> The Federal Home Loan Bank's 11th District is comprised of saving institutions in Arizona, California and Nevada. Few people who use and follow the 11th District Cost of Funds understand exactly how it is calculated, what it represents, how it moves and what factors affect it. The predecessor to the 11th District Cost of Funds index was the District semiannual weighted average cost of funds published for a six month period ending in June and December. The San Francisco Bank was the first Federal Home Loan Bank to publish a monthly cost of funds index. The funds used as a basis for the calculation of the 11th District Cost of Funds index are the liabilities at the District savings institutions: money on deposit at the institutions, money borrowed from a Federal Home Loan Bank (known as advances) and all other money borrowed. The interest paid on these types of funds is the cost of these funds. The ratio of the dollar amount paid in interest during the month to the average dollar amount of the funds for that month constitutes the weighted average cost of funds ratio for that month. The average cost of funds is said to be weighted because the three kinds of funds and their costs are added together before a ratio is computed rather than calculating averages individually for the three sources and using a simple average of the three ratios. This gives the greatest weight to the interest paid on deposits, and explains the delayed reaction of the index to rising fixed rate mortgages. London InterBank Offered Rate (LIBOR) LIBOR is the rate on dollar-denominated deposits, also know as Eurodollars, traded between banks in London. The index is quoted for one month, three months, six months as well as one-year periods. LIBOR is the base interest rate paid on deposits between banks in the Eurodollar market. A Eurodollar is a dollar deposited in a bank in a country where the currency is not the dollar. The Eurodollar market has been around for over 40 years and is a major component of the International financial market. London is the center of the Euromarket in terms of volume. The LIBOR rate quoted in the Wall Street Journal is an average of rate quotes from 16 major banks. The most common quote for mortgages is the 6-month quote. LIBOR's cost of money is a widely monitored international interest rate indicator. LIBOR is currently being used by both Fannie Mae and Freddie Mac as an index on the loans they purchase. LIBOR is quoted daily in the Wall Street Journal's Money Rates and compares most closely to the 1-Year Treasury Security index. Standard ARMS and the Differences A few options are available to fit your individual needs and your risk tolerance with the various market instruments. ARMs with different indexes are available for both purchases and refinances. Choosing an ARM with an index that reacts quickly lets you take full advantage of falling interest rates. An index that lags behind the market lets you take advantage of lower rates after market rates have started to adjust upward. The interest rate and monthly payment can change based on adjustments to the index rate. 6-Month Certificate of Deposit (CD) ARM This program has a maximum interest rate adjustment of 1% every six months. The 6-month Certificate of Deposit (CD) index is generally considered to react quickly to changes in the market. 1-Year Treasury Spot ARM This program has a maximum interest rate adjustment of 2% every 12 months. The 1-Year Treasury Spot index generally reacts more slowly than the CD index, but more quickly than the Treasury Average index. 6-Month Treasury Average ARM This program has a maximum interest rate adjustment of 1% every six months. The Treasury Average index generally reacts more slowly in fluctuating markets so adjustments in the ARM interest rate will lag behind some other market indicators. 12-Month Treasury Average ARM This program has a maximum interest rate adjustment of 2% every 12 months. The Treasury Average Index generally reacts more slowly in fluctuating markets so adjustments in the ARM interest rate will lag behind some other market indicators.



Unless otherwise indicated, these APR calculations are based on the following: Conforming loans (whose maximum loan amount is below $417,000 for the contiguous states, District of Columbia, and Puerto Rico or below $625,500 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan amount of $417,000 with closing costs of $8,340. Jumbo Loans (whose maximum loan amount exceed $417,000 for the contiguous states, District of Columbia, and Puerto Rico or exceed $625,500 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan amount of $5,000,000 with closing costs of $100,000. Your actual APR may be different depending upon these factors.