Fixed-rate loans. Fixed-rate mortgage loans always remain popular because they offer a monthly payment that is predictable and does not change. Most fixed-rate mortgages are for loan terms of 15 or 30-years. A 30-year loan has lower payments, but a slightly higher interest rate. With most programs, you should be allowed to pre pay your mortgage at any time and for any amount, and at no penalty.

Adjustable-rate loans. After an initial term, the interest rate on an adjustable-rate mortgage (ARM) loan is re-set periodically to keep the rate in line with current market interest rates. For example, a 3/1 ARM loan has a fixed rate for the first three years, adjusting once a year thereafter. A 5/1 ARM loan offers a fixed rate for the first five years, and after that, the rate can change once a year during the rest of the term of the loan. The lender sets the interest rate by adding a margin to an index rate, such as Cost of Funds Index and Treasury bill yields. For more information on the Costs of Funds Index, visit the Web site of the Federal Home Loan Bank of San Francisco. Most ARM loans have a periodic rate cap and lifetime cap to limit the amount the interest rate can increase each adjustment period and over the term of the loan, respectively.

Balloon mortgage loans. These loans often have interest-only payments. In this case, you don't amortize any loan principal and the entire loan amount is due at the end of the loan term. A balloon mortgage allows you to minimize your monthly payments until you refinance the loan. Another advantage is that a larger share of your payment may be eligible for the mortgage interest tax deduction.

Interest Only (IO Mortgages/IO Mortgage Payments). Conventional mortgages require that with each payment made, you pay back some of the money you borrowed (the principal), along with the interest on that money. Therefore, the principal owed on your mortgage will decrease over the term of the loan. In contrast, for a specified number of years, the IO payment plan allows you to pay only the interest. Since principal payments are not being made during this period, afterwards, you are required to repay both the principle and interest for the remaining term of the loan. This means your monthly payment will increase at this time, even with the same rate.

Some loans feature an interest only payment option that allows you to decide monthly how you would like your mortgage payment to be applied. To reduce outlay for a couple of months, you can choose to pay interest only. For the following months, you can make full payments to cover both principal and interest.

Reverse Mortgages. A reverse mortgage loan is similar to a home equity loan. These programs pay you either a lump sum amount or annuity based on the amount of equity in your home. You or your estate repay the debt when you sell or vacate the home, or at death. Any remaining equity goes to your estate. Unlike home equity debt, however, reverse mortgages do not offer the tax benefits. To participate in these programs, you and any co-borrowers must be at least age 62. You also must have either little or no mortgage debt on your home. There are no income requirements to participate in these programs. Since reverse mortgage loan payments are not considered as taxable income, your Social Security and Medicare benefits are generally not affected. Another feature of these programs is that you are never obligated for more than the value of your home when it is sold.

Advantages of Home Ownership
Buying a home is a rewarding experience. You derive a great deal of personal satisfaction from owning a home. Home ownership allows you to build up your personal net worth over time.

In addition to building up equity over time, owning a home offers significant tax breaks. The interest expense that you pay on up to $1 million in home mortgage debt is tax-deductible*, and your tax savings from the mortgage interest tax deduction are greatest in the early years of a mortgage loan. In addition to mortgage interest, it may be possible to deduct your local property taxes on your income tax return.

Finally, as a homeowner, you can tap the equity in your home in the future through refinancing, or with a home equity loan or line of credit.

Advantages of Refinancing
When you refinance your home, you are seeking to replace your current mortgage loan with a new loan, with terms that are more favorable for your current situation.

You may choose to refinance for reasons other than getting a lower interest rate. For example, you may decide to refinance to lower your payments using a consolidation loan.

Some consolidation loans can lower your monthly payment by stretching out your loan repayment period. The net effect is that your total interest payments usually increase as a result of the longer term.

If there is enough home equity built up, refinancing can also work by allowing you to borrow additional money (“cash-out” refinancing) to pay off credit cards or other debt, or to spend the money on anything you need. Many people find that paying off debt using their home alleviates feeling “tight” every month and struggling to make separate payments that have high interest rates. At the same time, this helps to keep their credit in good standing, which leads to positioning themselves for better financial opportunities in the future.

And finally, of course, refinancing makes it possible to combine two mortgage payments into one payment, hopefully at a lower rate than the average rate of the two payments, and combining monthly payments is always beneficial in terms of saving time paying bills.

Down Payments
A down payment is the cash you deposit towards a purchase. The larger the down payment, the less you are required to borrow. A conforming loan allows you to avoid private mortgage insurance if you make a down payment of at least 20% on the home purchase price. For 2009, the conforming loan amount for Fannie Mae- and Freddie Mac-sponsored loans is $417,000. For Alaska and Hawaii, the limit is $625,500. Not everyone has enough savings for a 20% down payment so in many instances, borrowers put down 5% of the purchase price.

Points/Tax deductible items
If you choose a point option, which is associated with a lower rate option, the point is included in your closing costs. One point is equal to 1% of the loan amount, so how much you pay in closing costs depends in part on how many points you pay on your loan. Generally, closing costs range from 3 to 6 percent of the home purchase price.

The IRS also calls these mortgage points, discount points or origination fees. Consult your tax advisor concerning the deductibility of interest and points, as you may be eligible for tax benefits.

Closing Costs
Closing costs can comprise fees for a credit reports, application and processing, points, title search, title insurance, as well as the home owner’s insurance premium and property taxes collected.

In general, you should expect to pay for expenses directly related to processing and approving your application, and funding your loan. Certain items, such as the title insurance are standard, county charges according to the loan amount. The amount of taxes and insurance paid at closing can be based on the month the closing takes place. Other fees vary according to lender/broker institution and available programs.

A Good Faith Estimate is prepared to show the borrower a breakdown of the loan profile, including closing costs, with or without points, rate, term and monthly payment.

Appraisal
Appraisal is the process of estimating fair market value of an asset. Appraisals are routinely required for real estate transactions. All Shores Mortgage uses certified professional appraisers that are an independent party to the transaction. Real estate appraisers use methods that are common in local practice. Comparable-sales method is widely used to appraise real estate.

Home Owner’s Insurance
Also called property insurance, homeowner's insurance protects the homeowner from weather-related damage, as well as potential liability from events that occur on the property. Lenders require homeowner's insurance coverage to protect the collateral that secures their loan. Some homeowner's insurance policies do not cover catastrophic events such as tornadoes, hurricanes or floods. These kinds of events generally require a separate insurance policy. Since homeowner's insurance premiums can vary in cost, it is worthwhile to “shop” and get quotes.

Credit (Fico Scores)
Credit report A credit report is a summary of an individual's credit history. It shows loan payment history, late payments, existence of liens or other encumbrances, debt forgiveness, bankruptcy filings, and number of inquiries by prospective lenders. The credit bureaus (Equifax, Experian and Transunion) calculate your credit score and submit it to a lender/broker to assist in making a credit decision. Your credit score is one criteria used for the lender's credit decision. The lender also adheres to loan-approval guidelines that are set by the company itself. Credit scores do not have information on your age, gender, color, religion, marital status, and employment. Contact Information for the Major Credit Bureaus is shown below.

EQUIFAX	EXPERIAN	TRANSUNION
(800) 685-1111	(888) 397-3742	(877) 322-8228
www.equifax.com	www.experian.com	www.transunion.com

Questions and Answers

How long is the process to complete a loan? The typical refinance at All Shores funds in three to four weeks. This includes the entire process from beginning to end; from submitting an application to when the loan funds (i.e. checks are delivered/money is wired to the borrower).

A purchase loan is typically completed within 4-6 weeks. In this case, the length of time taken to fund a loan can vary because it is driven by negotiation and terms of the contract of sale set forth by the attorneys for the sellers and buyers.

Do I need to hire an attorney? Generally, when refinancing, it is not necessary to hire an attorney. When purchasing a property, it is advisable to hire an attorney. In either case, there will be a bank attorney at your closing, who is responsible for explaining the terms and conditions of the mortgage note.

What is the difference between a home equity loan and a home equity line of credit? Generally, a Home Equity Loan is for a fixed loan amount, amortized over a fixed period of time, has monthly payments with a fixed dollar amount and the borrower receives the borrowed amount in a single lump sum.

A Home Equity Line of Credit is revolving, so it enables you to take out the amount of money you need, when you need it. You can borrow, repay and borrow again. Payments are required only when money has been drawn, and you pay interest only on the outstanding balance. Home Equity Lines of Credit feature a variable rate.

Both a Home Equity Loan and a Home Equity Line of Credit are considered 2nd mortgages, and require relatively strong credit history to qualify. You can choose a Home Equity Line or a Home Equity Loan, depending on your needs.

Does All Shores do commercial loans? Yes. All Shores handles commercial loans, land loans and construction loans as well as residential and investment loans for various types of properties, including condominiums, coops, single and multi family residences, PUDS and mixed-use properties.

How much can I borrow? How much you can borrow is determined by several factors, including the available equity in the home (or how much is being borrowed in comparison to the market value of the property), income, credit history, and guidelines for loan limits.