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Mortgage Refinancing Article:
Option One Mortgage Loans - Getting an Option ARM or Option One Mortgage Loan
Have you heard about or been interested in finding out more about option one mortgage loans? They are becoming very popular, but its important to understand how they work before you apply for one. I will describe, in this article, an overview of the most common type of option ARM mortgage loan or option one mortgage loan.
How do they work? Option one mortgage loans are basically interest only mortgage loans, except that the first year, you pay only 1.25% of the interest on the loan. The remainder of the interest that is accruing is being added to the loan amount. The second year of the loan you pay more interest until gradually you are paying either full interest only payments or fully amortized payments (interest & principle). The reason the loans are called option loans is because every time you have a payment due, you have the option of paying the less than interest only portion, interest only or a fully amortized payment. This option would be good in a situation where your income is sporadic.
This mortgage loan type typically gives you 4 payment options in every bill.
Here are your typical monthly payment options:
Option #1 - Pay a 15-Year fully amortized payment amount (p&i)
Option #2 - Pay a 30-Year fully amortized payment amount (p&i)
Option #3 - Pay the interest-only portion of the loan (Interest Only)
Option #4 - Make a partial interest payment (1.25% - 1.95% depending on your loan type) and defer paying the additional interest to the total loan amount. (Deferred interest can be counteracted by making bi-monthly payments and by property appreciation)
This type of loan is good if you want to:
Wait a while to refinance again - If interest rates drop again, so does your payment. If you want to accelerate your payments and increase equity quick, pay more on your loan and it will be applied to future payments & will be directly applied to the principle balance. Will you want a 30-year loan? Keep the option to pay your loan as a 30-year, 15-year, or interest only payments.
Have an adjustable rate mortgage but want stability - This loan has a payment cap. The interest rate on this loan is based on the 12 month-MTA index, the most stable index of the 4 main indexes (COFI, LIBOR, MTA & CMT). This index is always below prime. The interest rate is based on the world economic markets which have been steadily coming down over the last 3 years. This loan has a 5-year fixed payment option as well.
Invest your payment savings in something else - This could open up opportunities for you if you could invest in real estate, the stock market or another investment when you use the extra $500-1000+ a month you free up from your property payment.Pay off debt with your payment savings - You can use the payment savings to pay off other debt.
Have security and options in your mortgage loan - The main benefit to this type of loan is the security of a mortgage payment that you control. You decide at any time what kind of a mortgage you want. If all goes well in your future, you have the freedom to pay your 30 year loan into a 15 year loan without even consulting another mortgage broker.Get more home for your money - You can qualify for more home with these low payment options.
Who Can Qualify? Qualifying for this loan is basically the same as any other loan, it is based on credit, equity & assets, if you are strong in 1 of these or 2 of these, you could probably qualify and with lowest rate possible.
What if I want to take out a stated income loan? "Stated Income" or "No income/assets" loans are possible with this Option One Loan.
These are just general guidelines and information about this type of loan. You will want to discuss all of these details with your broker or lender before you actually complete the loan. These factors may vary with each individual lender.Many lenders do not offer their customers this type of loan. If you are seeking an option one or option ARM loan, you will need to talk to your broker about it or find a broker that can do this type of loan. To see our recommended lenders for this type of loan. Visit here: Option One Mortgage Lenders.
Written by Carrie Reeder, Owner of ABC Loan Guide. Carrie's website is an informational mortgage loan website. Her website has articles and a list of recommended mortgage lenders for many different types of mortgage loans.
Related Sensible Mortgage News and Articles From adzines
Your equity is the amount your home is worth, on the market, minus the amount you owe to your mortgage broker. For example, if your property is worth $200,000 and the balance you owe your mortgage broker is $100,000, then your home equity - the part of your property that you own free and clear - is $100,000.
Whether you need some extra cash to pay off some credit card debts, or to make some home improvements, home equity lines of credit or second mortgages can be great ways to get started.
Do you want a mortgage loan for your new home? Trying to qualify for a new mortgage can be very tough, especially if you aren't aware of the effect your credit report score has on your ability to get approved for loans. One of the first things a lender looks at to determine your suitability for a mortgage loan is your credit report, or FICO score.
Applying online for a mortgage is very fast and easy. Just make sure of a few things before you start to look for places to apply to. Here are some tips to keep in mind when searching for a mortgage company to help you online:
You've been looking at houses for months, and finally you've found it--the house that's just right. So now, all you have to do is to purchase your new home, move in, and get settled, right? Not quite. There's one more big step to go-getting a mortgage loan. You're going to want to decide on the type of mortgage and payment terms that fit within your budget. And you're going to have to prepare yourself by doing some research. What follows is valuable information that will be crucial in helping you make loan decisions that will fit your budget and circumstance.