Q: What are points?

A: It is a fee required by the lender / broker which is usually financed into your loan, expressed as a percent of the loan amount. 1 point means a charge equal to 1% of the new loan amount. In most cases, it is paid only if the loan closes.

Q: What is a rate lock?

A: A rate lock is a security measure a lender allows a borrower to purchase and guarantee a rate on a given day albeit the loan may not have closed yet or still may be in the processing phase. The typical rate locks usually run for 30-45 days – the longer a borrower requests for a rate lock to be – the more costs the borrower incurs to secure it.

Q: What are the different indexes used for Option Arm products?

A: The typical indexes used are: MTA, COFI, COSI, CODI, 11th District Cost of Funds and the LIBOR index. The most common one used is the MTA index. Individual lenders and banks will use a specific index as well in lieu of the MTA index.

Q: How often will an Option ARM product / payment adjust?

A: This is always a good question to ask your loan consultant depending on a specific product you are requesting, albeit, the usual guideline is the following: The monthly minimum payment can usually go up a maximum of 7.5% per year for the first five years. After the five year period has elapses; the Option ARM product will convert to a traditional adjustable mortgage with only 2 payment options being an interest only payment option or a full principal and interest payment option.

Q: What are the different types of income qualification available?

A: There are four main categories as follows:

SISA = stated income / stated assets. This means you provide no documentation of income of assets.
SIVA – stated income / verified assets. This means you provide no income documentation but you do supply documentation of assets / reserves.
Full Documentation - This means you supply both income and asset documentation.
No Doc. - This means you supply no income or asset documentation similar to a SISA, but you also list no information on loan application regarding income, assets, etc.

Q. What are some of the main lenders NEGAMEXPERTS.COM and it parent company represents?

A. A few that will be very familiar to you may be the following: Washington Mutual, Countrywide and World Savings to name a few. OPTIONARMCONSULTANTS.COM has over a 100 lenders in their Option ARM portfolio.

Q. Why are there options to have prepayment penalties?  Why would anybody want one?

A.   The prepayment penalty can serve many functions:

1. It can be used to bring the margin down, lowering the overall rate.
2. It can be used to pay the broker in lieu of points and fees and keep Closing costs low.
3. If you don't take a prepayment penalty and pay up front charges and closing costs and keep the loan for 3 years, you would have spent all that money at closing for nothing.

Q.  What if I have a prepayment penalty and need to refinance or sell before the penalty expires, can I still do that?

A.    Sure you can, it's a penalty that is added to your closing costs and typically it’s six
       months of interest on the loan. Working closely with your professional loan
       Consultant when choosing the length of the prepayment penalty can hopefully help
       avoid ever paying a prepayment penalty.

Q: What is a Hybrid Option ARM loan and how is it different from a traditional Option ARM loan?

A: The Hybrid Option ARM gives you all the advantages of a traditional Option ARM loan (four payment options to choose from each month, low minimum payment option, etc.) with the added benefit of fixing your fully indexed rate and the monthly minimum payment on the loan as well so there is not fluctuation risk.  You can lock the rate in for a desired period (i.e. 3, 5, 7, 10 years), so the fully indexed rate and monthly minimum payment will not adjust during the lock period..  The two major advantages are obviously fixing your rate, but also having less deferred interest on your loan due to the fact that the fully indexed rate will never go up. 

Q: Is a Pay Option ARM the right product for everyone?

A: Yes and no! Pay Option ARMs are not a magical product to help somebody afford a house that they truly cannot afford! Unfortunately – the fixed minimum payment is not a ‘free lunch” and only people who are holding a property for short term (3-5 years) or need the benefits of different payment options each month (fluctuating income) should pursue this loan. The minimum interest payment does not include all the interest that accrues each month. This leaves many homeowners who did not understand the product properly upfront with a mortgage balance that is 110%, 115% or 125% of original loan balance they started with down the road if not used in the proper circumstances. If a broker or lender ever tells you they have a “fixed 1% loan” for you… steer clear from them for they are more concerned about commission than your well being. At OptionArmConsultants.Com, we only want clients who properly understand Pay Option ARMs and can utilize and benefit from this sometimes confusing and sometimes risky product to produce a positive outcome.

Always feel free to contact us for any questions you may have at 877-315-9853.