Because of the current mortgage crisis my email inbox has been flooded with questions from consumers about loan programs, loan products, and loan features.  Over the last couple years, quite a few of those consumers put their faith in Loan Officers to guide them through the muddy mortgage waters.  Unfortunately, their loan officer may not have been a great navigator.  This could be because Loan Officers do not require a high level of training or education to get a license.  This could also be because loan officers made an extraordinary amount of money, if they kept their clients in the dark.  Any Loan Officer that puts their pocketbook in front of a consumer's well being should be immediately ex-communicated from The Mortgage Industry!  I will save that conversation for another time.  Here is the skinny on some loan programs and products as well as features that many of my clients have had questions about. 

The Good:  These products are the way to go right now.  They are the most stable and in times of uncertainty they will be the "Go To" options.

• Fixed-Rate Mortgage:  This is a mortgage that has a fixed rate for life of the loan.  These mortgages have terms from 15 to 40 years.  I have even seen some 50 years but that was more on the sub-prime side of the industry and quite frankly is not a good loan.  This type of mortgage has regained popularity due to the decline in the market.  In my opinion, this is probably the best loan to be in right now if you're planning to be your house for any extended period of time.  Even if you do not plan on staying in the loan for a while, it is better to be able to make the decision when you choose to and not when the loan terms require you to refinance.

The Bad:  These are products or features that are currently not the best options for the consumer.  They had their "hey day" and could very well become popular again in a different market.

• Adjustable Rate Mortgage ARM:  I'm sure everybody has heard all of the evils about this mortgage.  This loan had its time and place!  Notice I said the word had!  Right now this is probably NOT the best loan to be in, unless you have one of the longer term ARM mortgages like five, seven or 10 years.  However, there are scenarios that would call for an ARM.  For instance, I have investors that I work with that would prefer to take the reduction in interest-rate that an ARM provides to save the money in their monthly payments. 
• Interest Only Mortgage Loans:  This loan was very popular many years ago.  Instead of paying your monthly required interest and a portion of your principle down every month, the minimum required payment was the interest only.  This feature was used to keep payments manageable while not adding on to the principle balance like would happen in a Negative Amortization Loan.
• Pre-Payment Penalties:  Ah, the Pre-Payment Penalty (PPP).  A necessary evil that allows banks to refinance your mortgage every couple of years and STILL be guaranteed a certain amount of profit.   You see a PPP in actuality ensures that a loan will remain saleable on the secondary market.  Why would an entity purchase a loan that did not have favorable terms if it was not guaranteed a profit?  While there is no absolute guarantee, especially in this market, a PPP allows Mortgage Banks to sleep cozy at night.  In turn you get a little better rate. 

The Down Right Evil: Let's be clear, it is one thing to place a client in a loan when you have good intentions.  These loan products and programs are strictly EVIL and are designed to benefit the Loan Officer and Mortgage Banks only!

• Negative Amortization Loans:  Basically, these loans allow a borrower to make a monthly payment that is less than the required interest due.  This creates a gap between interest due and interest paid.  That gap is then taken and placed on the principle balance of the loan.  So if your minimum payment was $500 per month and your interest due was $800 per month, then $300 per month would be added on to your principle balance every single month.  If you make that payment for 3 years then you will now have added $10,800 onto your principle balance.   In addition to adding to the balance, the bank is now getting interest payments on your deferred interest.  Can you say double dipping?
• Option Arm Mortgage:This has also been referred to as the "Toxic ARM" or Pick a Payment Loan.   This is a loan with the low start rate payment like 1%, which has the Negative Amortization feature from above.  You also have the option to pay interest only, 30 Year Fixed, and 15 Year Fixed payments.  This loan is not your friend!  This loan was designed for consumers that wanted to maximize monthly cash flow for other investments that would NET them more money than the homes monthly appreciation.  You know investor type people.  Then a couple of years ago, the Mortgage Banks realized that they made a tremendous amount of money on this loan.  You see it works like this.  The fully indexed rate is variable.  It is based on an index like the COFI, COSI, MTA, etc.  If these indexes go up, so does your fully indexed rate and in turn your payments.  Now if you only pay the Start Rate Payment Option, you get into a Negative Amortization situation and the Bank starts to double dip! 
• "Wow, we can make a ton of money on this mortgage product!" said the Mortgage Bank.  "We need to sell more of these loans!  Let's tap into the greedy Mortgage Bankers and Brokers on the retail level!  Moooh-ha-ha-haha-ha" 
• They then decided to pay 3 Points Yield Spread Premium to the Loan Officers who placed people in these loans as long as the loan had a Three-Year Hard Pre-Payment Penalty on it.  You heard it right 3 Points!  Now you have a bunch of slime ball Loan Officers who are jamming people into these loans with the 1% Start Rate as the hook.  They were also putting people into homes that were well beyond their means based on the LOW start rate payment.  So now you have principle balances skyrocketing, indexes going up at a record pace, the market turned, and many people losing their homes.  This is a bad loan!

If you have more questions about Las Vegas Home Loans, feel free to contact me directly.

Your mortgage partner for life,