Loan Programs

Finding the best mortgage is more than just finding the lowest mortgage rate. The best mortgage is different for each individual, and is based on many factors other than the lowest rate. This makes comparing mortgage loans a very important step. Carpenter Mortgage Services finds the lowest mortgage for you in the long run, not just right now, by evaluating the different options for mortgage loans to meet your needs. Our trained mortgage professionals can explain the different types of mortgages to make sure you save money on your loan program.

This chart breaks down the different kinds of mortgage loans, so you can see at a glance what the advantages and disadvantages are to each of the mortgage loans. Compare and contrast their various features to figure out which option would work best for you.

*Years you plan to Own* the Property**	Recommended Program
1-3	3/1 ARM, 1 year ARM or 6 month ARM, 1 Month ARM, 2-1 Buydown
3-5	5/1 ARM, 5/25 year Fixed
5-7	7/1 ARM, 7/23 year Fixed
7-10	10/1 ARM, 30, 15, or 10 year fixed
10+	30, 20, or 15 year fixed

Loan Programs	Advantages	Disadvantages
Fixed Rate Mortgages 30, 20, 15, 10 year fixed	Monthly payments are fixed over the life of the loan Interest rate does not change Protected if rates go up Can refinance if rates go down	Higher interest rate Higher mortgage payments when shorter term Rate does not drop if interest rates improve
2/ 1 Buydown Is a 30-Year Fixed loan in which Borrower starts at 2% below the Note Rate (lender subsidized). Ie. if the note rate is 7.5%; then 1^st yr is 5.5%, 2^nd yr is 6.50%, then 7.5% for the remaining 28 years.	This loan should be considered by borrowers having difficulty qualifying due to their income level. Lower Initial Monthly Payments. Fixed payments	Note Rate is higher than prevailing current market fixed rates. May not Qualify to refinance at Note Rate after 2 years. Payment Shock at each adjustment
Short Term Fixed Rate Mortgages 5 / 25 year Fixed 7 / 23 year Fixed	Payment amortized same as a 30 year Fixed. Start rate is lower than a 30 year fixed Does not adjust as an ARM.	Note rate may be higher at year of adjustment (based on 60 –Day FNMA yield)
Hybrid Fixed-Adjustable Rate Mortgages 10/1 ARM 7/1 ARM 5/1 ARM 3/1 ARM	Lower initial monthly payment Lower payment over a shorter period of time Rates and payments may go down if rates improve May qualify for higher loan amounts Cash Flow	More risk Payments may change over time Potential for high payments if rates go up Possible Pre-Payment Penalty
Balloon Mortgages 7 year 5 year	Lower initial monthly payment Lower payment over a shorter period of time Many balloon mortgages offer the option to convert to a new loan after the initial term.	Risk of rates being higher at the end of the initial fixed period Risk of foreclosure if you cannot make balloon payment or if you cannot refinance or if you cannot exercise the conversion option
Adjustable Rate Mortgages 1 year ARM 6 month ARM 1 month ARM 11^th DCOFI 6 month CD 12 month MAT	Lower initial monthly payment Lower payment over a shorter period of time Rates and payments may go down if rates improve May qualify for higher loan amounts Buy more Home Cash Flow	More risk Payments may change over time Potential for high payments if rates go up Margins and Indexes vary. Possible Pre-Payment Penalty.
Piggy-Back Loans ( ie: 80/20 % CLTV)	Eliminates Private Mortgage Insurance (PMI) by combining an 80% lst Mortgage with the other 20% being a 2^nd Mortgage. Possible tax advantage (interest write-off) Provides option if you miss the conforming loan limit of $ 417,000, as conforming loan rates are lower then jumbo loan rate	2^nd Mortgage may have a higher interest rate than the PMI Two separate loan payments to track 2^nd Mortgage Lender may not subordinate their position when refinancing the 1^st mortgage Need 2^nd Mortgage lender approval causing delay in closing
First Time Buyer Programs	Lower or No down payment required May be easier to qualify Sometimes you may get lower rates	May be subject to income and property value limitations Some programs which have government subsidies may have a recapture tax if you sell the house too early. PMI required and is expensive
Stated Income / Assets Programs (Min. 680 credit score)	Don't need to verify income Faster approval Limited Documentation	Higher rates Higher down payment Significant assets may be required Good to Excellent Credit required
No point, No fee Programs	No closing costs Less money required to close	Higher rates Higher payments
Imperfect Credit Programs A- to D paper loans (Credit Scores <580).	Potential for reestablishing credit if you pay your mortgage on time. Past bankruptcies or foreclosures may even be acceptable.	Higher rates Terms may not be as favorable Harder to get long term fixed loans Loans may have prepayment penalties Require greater Equity in property
Home Equity Line of Credit	You only borrow what you need Pay interest only on what you borrow Flexible access to funds Interest may be tax deductible When used for debt consolidation, you may be able to reduce your monthly debt payment	Rates can change. The maximum interest rate is normally high. Payments can change Harder to refinance your first mortgage
Home Equity Fixed Loan	Fixed payments Interest may be tax deductible	Higher interest rates than on 1st mortgages Harder to refinance your first mortgage

Loan Programs

Fixed Rate Mortgages

2/ 1 Buydown

Is a 30-Year Fixed loan in which Borrower starts at 2% below the Note Rate (lender subsidized). Ie. if the note rate is 7.5%; then 1st yr is 5.5%, 2nd yr is 6.50%, then 7.5% for the remaining 28 years.

Short Term Fixed Rate Mortgages

5 / 25 year Fixed 7 / 23 year Fixed

Hybrid Fixed-Adjustable Rate Mortgages

Balloon Mortgages

Adjustable Rate Mortgages

Piggy-Back Loans ( ie: 80/20 % CLTV)

First Time Buyer Programs

Stated Income / Assets Programs

(Min. 680 credit score)

No point, No fee Programs

Imperfect Credit Programs

Home Equity Line of Credit

Home Equity Fixed Loan

Is a 30-Year Fixed loan in which Borrower starts at 2% below the Note Rate (lender subsidized). Ie. if the note rate is 7.5%; then 1^st yr is 5.5%, 2^nd yr is 6.50%, then 7.5% for the remaining 28 years.

5 / 25 year Fixed
7 / 23 year Fixed