Top 5 Most Popular Loan Products

The Top Five Hottest Mortgage Products for Today's Consumer

Over the past year, as more and more people have sought to better leverage their loans to address their home investment strategy, the mortgage industry has seen a dramatic increase in the use of creative home mortgage loans.

The Top 5 Loan Products are:

1. 80/20 Loans - Actually two loans, 80/20 loans offer the consumer 100 percent financing, with the first loan comprising 80 percent of the homes purchase price and the second loan comprising the remaining 20 percent. This product allows the buyer to enter the home for virtually no money down. Many lenders have become more aggressive in their marketing of these programs, and they are easier to get into now more than ever. Credit requirements for 80/20 loans have lowered significantly over the past 6 to 12 months, with necessary FICO scores dropping close to 100 points.

2. Interest Only (I/O) Loans - With I/O loans, the buyer starts off with paying only the interest on their loan, paying none of the principal of the loan for a fixed time period, usually 10 years. The loan would then convert to a fully amortized loan. The draw of these programs is the potential for low monthly payments, allowing the buyer to buy more house for less money now, increasing the affordability factor. I/O loans are ideal for buyers interested in accruing home equity for investment purposes and its use has seen a sharp increase over the past 6 months.

3. Monthly ARMs - These Adjustable Rate Mortgages (ARMs) feature a short term fixed rate period of usually three or six months after which time the rate will adjust to the current rate at that time, continuing to do so after each period for the life of the loan. This type of loan is flexible in that it could be combined with other features such as an Interest Only option. Also, payments are adjustable - buyers can the minimum one-month and then a significant amount more the next month, enabling them to reduce the principal balance of the loan, much like a credit card. Due to today's low short-term rates, record-paced home value appreciation and a short-term focus among buyers, these loans have become increasingly popular.

4. Long-Term Locks - Today's low interest rates have prompted the popularity of long-term lock loans, which allow the buyer to lock in today's rates for up to 12 months. These loans are geared towards new build buyers who often sign a contact on their home 6 to 12 months in advance of the home's completion, thus assuring themselves of the current low interest rate.

5. Home Equity Line Of Credit (HELOC) - A home equity line of credit (HELOC) is a loan set up as line of credit for a maximum amount of money established when purchasing a home. Often times, this loan is taken out as a second or piggyback loan, where the primary loan is used for payment on the home. This loan provides instant equity allowing the homeowner greater flexibility.

For more information about these products, please contact Anthony Pipitone at 312-492-3239.