Q: What is the difference between an ARM (adjustable rate mortgage) and a Balloon?
A: An ARM is a 30-year mortgage that is fixed for a length of time and then becomes an adjustable (6 months, 1, 3, 5, 7, or 10 years.) A balloon is fixed for 5 or 7 years and then the note becomes due. The payment is amortized over 30 years with both loans.

Q: What is mortgage insurance?
A: Mortgage insurance is there to protect the lender when they issue mortgages with less than 20% down payment. Depending on the transaction there are many ways to avoid mortgage insurance, however, there are times when it is beneficial and cost efficient to have this as part of the transaction.

Q: What is the advantage of doing a two loan option versus one loan?
A: The main advantage is usually the elimination of mortgage insurance and the ability to pay taxes separately from payment.

Q: What are tax impounds?
A: This is an account created at the time of closing that holds (depending on the time of year) anywhere from 2 months to 10 months of taxes. The taxes are also included within your monthly payment.

Q: What is locking?
A: Locking is when you have secured a property (in the case of a purchase) or when you have agreed on a refinance scenario, and would like to secure the rate for a set amount of time. Generally locks are based on 30-60 day time frames.

Q: What is Sub-Prime?
A: This is a method of financing that pertains to people in a variety of situations. Most of the time the borrowers have credit issues that they are trying to work out and would prefer not to wait for the conventional guideline requirement of 12 months of seasoning. These programs are extremely beneficial and allow many people to get into homes that might not otherwise.

Q: What is an FHA loan?
A: This stands for “Federal Housing Administration” and this is a government loan that allows buyers to get into home with very little down (3% down payment) with extremely accommodating interest rates.