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The Pay Option ARM Program is ideal for…
This loan is designed to give borrowers maximum payment flexibility. By allowing as low a payment as possible, with options to pay more, borrowers are given greater control of their monthly cash flow. In addition, this program has low annual optional payment caps and an attractive life cap. NOTE: the Pay Option ARM is now available in 3, 5, 7 or 30 year fIxed. So technically this is call a hybrid Pay Option ARM or 30 Year Fixed Pay Option.
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Borrowers with the potential of future income growth.
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Borrowers who want to have more control over their finances and cash flow.
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Borrowers whose income varies from month to month, such as self-employed or commissioned sales people.
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Borrowers who want to purchase homes of high value, yet want to keep their payment manageable.
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Significant savings for high-end borrowers. This product is good for loans up to jumbo & super jumbo (very large loan amounts.)
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INVESTORS- Maximize cash flow and take advantage of your equity on a monthly basis.
The minimum payment for this program could be up to 50% less than your traditional payment.
Program Design
This loan is designed to give borrowers maximum payment flexibility. By allowing as low a payment as possible, with options to pay more, borrowers are given greater control of their monthly cash flow. In addition, this program has low annual optional payment caps and an attractive life cap.
Basics
This program is based on the Monthly Treasury Average (MTA). The MTA is a very stable index used to determine the monthly interest rate. It is derived from the twelve-month average of monthly yields on activity traded U.S. Treasury Securities.
How the Pay Option ARM Works
The borrower’s first year payment is based on a low interest rate, with terms as long as forty years. Minimum payments are adjusted annually, with the option to ensure monthly payments will not increase by more than 7.5% annually.
The borrower, is only required to pay the minimum payment. They can pay that amount, or more. The borrower is provided with up to three options each month:
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The minimum payment,
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The interest only payment,
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The full payment- a payment that will amortize the loan over the remaining loan term
Loan Term
This is the period of time in which you pay your mortgage. A traditional mortgage is 30 years. With the Pay Option ARM your term is 40 years. How does this affect me? If you owe $1,200 and pay this over a year that would give you a payment of $100 a month. If you increase the term to 2 years your payment would drop to $50 a month. This is a very simple example with no interest, get the idea? Now you can see that changing the term from 30 to 40 years would greatly reduce your monthly mortgage payment, without any other factors.
Optional Limited Payment
The monthly payment will not increase by more than 7.5% from the prior year’s monthly payment amount, regardless of the increase in interest rate.
Optional Interest Only Payment
The monthly payment will be applied towards interest only. This means that the monthly payment will not reduce the principal balance.
Full Payment
The monthly payment that would be sufficient to repay the unpaid principal over the full term of the loan.
Deferred Interest
 If the monthly payment is less than the amount of the interest portion, the monthly payment amount will be subtracted from the interest portion and this difference will be added to the unpaid balance. For example-let's say your fully indexed rate is 4.5%* and you only pay 1.5%* each month. That means you would pay $250 a month for a $200,000 home. That leaves 4.5% minus 1.5%- 3% in interest each month. This interest is added to your mortgage balance. Wow! Why would I want to do that? Well, if your house appreciates (increases in value over time) let's say 20%, that leaves 17% each year that is yours. You would realize this equity when you sell your home. However, now, when you need it you will have greatly enhanced cash flow.
Qualifications
1) You need to have 4 trade lines reporting on your credit for the past 24 months.
2) No derogatory reporting on your credit in the last 24 months and all collections over $200 satisfied.
3) Down payment- this program does not provide 100% financing; however, a full document loan only requires 5% down payment.
Full Documentation Requirements
1) Owner Occupied-
a. credit score of 620,
b. 5% down payment, or 640 with 3% down,
c. 2 months reserves
2) Second Home-
a. credit score of 620,
b. 5 % down payment,
c. 6 months reserves
3) Investment Property-
a. credit score of 620,
b. 10% down payment,
c. 6 months reserves
State Income Requirements
1) Owner Occupied-
a. credit score of 660,
b. 5% down payment,
c. 6 months reserves
2) Second Home-
a. credit score of 660,
b. 5% down payment,
c. 6 months reserves
3) Investment Property-
a. credit score of 660,
b. 10% down payment,
c. 6 months reserves
Stated Income/Stated Assets Requirements
1) Owner Occupied-
a. credit score of 660,
b. 10% down payment,
c. 6 months reserves
2) Second Home-
a. credit score of 680,
b. 10% down payment,
c. 6 months reserves
3) Investment Property-
a. credit score of 660,
b. 10% down payment,
c. 6 months reserves
True No Doc Requirements
Owner Occupied Only-
a. credit score of 660,
b. 20% down payment
Foreign National Requirements
Similar to above. 20% down payment required.
*Interest Rates and programs are subject to change without notice. Rates may not be available at time of loan application or commitment.
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