ALL LOANS AND DEFINITIONS

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As leaders in the financial service industry, we pride ourselves as being one of the most knowledgable sources of mortgage processes and information. From the broad steps, to all of the factors associated with them. Let our award winning expertise and service assist you in the process. Give AFS a call and we'll be happy to help you along the way.

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DEFINITIONS

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Determine How Much You Can Afford

Generally, you should qualify for monthly housing expense (PITI, or the monthly payment for mortgage principal, interest, property taxes and property insurance) equal to 33% of your gross monthly income. The best way to know with confidence is by getting pre-approved.

PITI

PITI is an acronym for the items included in a monthly payment: principal, interest, taxes, and insurance.

Private Mortgage Insurance (PMI)

This is a type of insurance provided by a private mortgage insurance company to protect the lender in the event of loan default. This type of insurance is required when a borrower has less than 20% equity in a home. Private mortgage insurance is paid monthly.

Escrows

An Escrow Account is used to protect monthly payments for taxes and insurance obligations.

Loan Origination Fee

Origination fees are expressed as points or as a percentage. A one point or one-percent origination fee is equal to 1% of the loan amount.

Discount Points

Discount Points are equal to a percent of the loan amount. 1.25 points are equal to 1.25% of the loan amount. For example: on a $100,000 loan amount that equals $1,250. Typically, if you pay points, it will lower the Interest Rate.

Finance Charge

It is the cost of credit expressed as a dollar amount. It includes any charge payable directly, or indirectly, by the applicant, and imposed directly, or indirectly, by the lender, as a condition of receiving credit.

APR

The Annual Percentage Rate (APR) is the cost of credit expressed as a yearly rate. The APR combines interest rate, points, and related fees.

Jumbo Loan

Any loan above & beyond conventional guidelines, or lending limits in a specific county or state.

Expert Advice:

Be sure to know what your limits are - content AFS & we can help!

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15-Year Fixed Mortgage

Mortgage fixed for 180 months.

Expert Advice:

15 year loans can produce a forced savings by paying off your loan at a lower interest rate faster. 15 year mortgages save money with slightly lower interest rates and a shorter loan period. A 30 year mortgage is not written in stone, what suits your situation and goals best?

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30-Year Fixed Mortgage

Mortgage fixed 360 months.

Expert Advice:

If you lose your job or experience financial difficulty, a 15 year mortgage has no flexibility. A 30 year mortgage where you’ve increased the payment could be dropped back down at any time. However, you want to safeguard your investment at whatever term. Affordable Financial Services can lend a helping hand, reducing interest and penalty fees, helping your money work for you.

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Loan-to-value ratio

Loan-To-Value Ratio – LTV Ratio’ is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.

Freddie Mac

Freddie Mac – Federal Home Loan Mortgage Corp – FHLMC’ is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage-backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries.

Fannie Mae

Fannie Mae – Federal National Mortgage Association – FNMA’ is a government-sponsored enterprise (GSE) that was created in 1938 to expand the flow of mortgage money by creating a secondary mortgage market. Fannie Mae is a publicly traded company which operates under a congressional charter that directs Fannie Mae to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate- and middle-income Americans.

Amortization schedule

A complete table of periodic blended loan payments, showing the amount of principal and the amount of interest that comprise each payment so that the loan will be paid off at the end of its term. While each periodic payment is the same, early in the schedule, the majority of each periodic payment is interest. The percentage of each payment that goes toward interest diminishes a bit with each payment, and the percentage that goes toward principal increases. Later in the schedule, the majority of each periodic payment is put toward the principal. The last line of the schedule shows the borrower’s total interest and principal payments for the entire loan term.

Amortization

Amortization is the paying off of debt with a fixed repayment schedule in regular installments over a period of time. Consumers are most likely to encounter amortization with a mortgage or car loan.

Debt Consolidations Loan

Affordable Financial Services can consolidate all your existing debt into one low, manageable monthly payment through a refinance of your existing mortgage, saving you hundreds, even thousands in interest.

Expert Advice:

Don’t pay high interest rates to credit card companies. Consolidate your bills today: credit cards, auto loans and student loans, utility bills, store cards and back taxes into one low monthly payment through a refinance of your existing mortgage. Pay off your debt quicker and easier. Consolidate your debt as an alternative to bankruptcy and improve your credit worthiness by cleaning up your credit record. Save yourself from interest charges and worry. Take steps to ensure a debt free future.

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Interest Only Loan

Interest Only Loans allow you to pay interest on your loans for five years. After five years your loan will require monthly payments of principal and interest. Interest Only Loans allow the buyer greater flexibility in housing options.

Expert Advice:

A buyer can take on a larger property with larger payments and not have to worry about making regular monthly payments right way. The buyer should keep in mind that payments will increase substantially and money that was perhaps invested elsewhere will be obligated to pay the mortgage.

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Fixed Rate Mortgage

Fixed mortgages are said to be the safest because the fixed rate protects you from the uncertainty of a changing rate. A fixed rate guarantees that your mortgage payments for interest and principal won’t change.

Expert Advice:

In the event of a substantial rise in the standard interest rate, a fixed rate may work to your advantage. If you take out a 15 year fixed mortgage at 6% and it falls to 4%, you will lose out. If interest rates rise to 10%, you would’ve made a wise decision. Affordable Financial Services wants to make sure you make the best choice you can for your refinancing goals.

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ARM (Adjustable or Second Rate Mortgage)

A fixed rate is set for the life of the loan. Affordable Financial Services offers variable rate mortgages, also known as ARM’s or adjustable rate mortgages. Adjustable rate mortgages provide for periodic changes in the interest rate. Most consumers shy away from adjustable rate mortgages because they think they will get stuck in a situation where they will pay a lot more than with a fixed rate mortgage. Make sure you understand the terms of your loan.

Expert Advice:

Get a lower loan payment with an adjustable mortgage, as long as interest rates remain the same or go down. Your monthly payments will increase if interest rates rise. Do you plan on selling or buying a home on Long Island within the next few years? The lowest adjustable rate could be just what you’re looking for.

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Credit Score

These were created for general use in making lending decisions and are based on credit data only. FICO* scores are one type of generic credit score. FICO scores range from approximately 400 to 900. The lower the score the greater the risk of default on a loan. A credit score below 620 gives a lender a strong indication that a borrower’s credit reputation is not acceptable. Under the Fair Credit Reporting Act, all consumers can obtain a copy of their credit reports by calling: Equifax: 800-685-1111 Trans Union: 800-916-8800 Experian: 800-682-7654 *FICO: Fair ISAC Credit Company developer of FICO scores

Home Equity Loan

A home equity loan allows you to borrow against the equity in your home. Equity = Value of Home Minus What You Owe. Use the equity you’ve built in your home to borrow money for whatever you need. There are two ways borrowers can make use of home equity to get cash: refinance your home for more than the remaining balance or take out a home equity loan. It has credit card and check capability so you can draw on funds as needed. You only pay interest on the credit that is extended to you.

Expert Advice:

Flexibility of a home equity loan is great for periodic and home expenses: auto purchases, home improvements, college tuition, home improvements, credit card debt and other emergency expenses. You can finance expenses by making monthly payments or paying off the balance of the home equity line of credit completely. How much debt do you have? How quickly do you want to pay it off? Let Affordable Financial Services help you choose a loan that is just perfect for you.

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Pay Off Your Mortgage Faster

Save more money with a shorter amortization term. Switch from a 30 year to 15 year loan. Reduce your total costs, increase your monthly payments and pay off your mortgage a whole lot quicker. Also, Increase payments on a 30 year mortgage by a small amount and you’ll pay it off faster.

Lower Your Interest Rate

Interest rates are still at all time lows, despite slight increases. For whatever reason: bad credit, lack of established credit or higher interest rates at the time of your first mortgage, you can refinance with a lower interest rate. Why not save yourself as much as you can by reducing your interest costs along with your monthly payments. Take Advantage of Lower Rates – look into a shorter term loan, and/or a new ARM.

Lower Your Payments

There are Two Ways to Lower Your Monthly Payments If Interest Rates Don’t Go Down. You can Extend the Repayment Plan, or Switch From a Fixed Rate To An ARM.

Refinancing

A refinance occurs when a business or person revises a payment schedule for repaying debt. Mechanically, the old loan is paid off and replaced with a new loan offering different terms.

Expert Advice:

Homeowners refinance for various reasons. Check out our options to learn more about refinancing, and see if any apply to you. Give Affordable Financial Services a call if you have any questions.

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Conventional Loan

Loans that are within Fannie Mae and Freddie Mac lending limits.

Expert Advice:

Contact Affordable Financial to see if you qualify, and for ways to expedite the process.

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VA Home Loan

Any Veteran that was honorably discharged qualifies for VA loan benefits.

Expert Advice:

Contact Affordable Financial to see if you qualify, and for ways to expedite the process.

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FHA Loan

FHA financing provides a safe and affordable loan option for homebuyers. With only a 3.5% down payment requirement, competitive fixed rates, and a generally easy qualification process,

Expert Advice:

FHA loans are a popular choice today, especially for first time homebuyers: FHA loans are tailored to first-home buyers or those who have already bought a home but have less-than-perfect credit. However, almost anyone is eligible for an FHA Loan. Connect with one of our Loan Specialists to see how much you can save today!

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HARP Loan

While banks usually require homeowners to have at least 20% equity to qualify for refinancing, this proved to be a problem during the current crisis, where homeowners have been faced with falling home prices. HARP was created to help these borrowers whose home values have fallen and who owe more than their homes are worth by taking advantage of the lower mortgage rates and refinancing their homes.

Expert Advice:

many underwater homeowners may consider a cash-in refinance if they can find no-cost refinancing or get help from the government’s Home Affordable Refinance Program (HARP), despite being short on home equity.

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Reverse Mortgages

A reverse mortgage is a special type of loan that enables individuals aged 62 or older to convert some of their home’s equity into tax-free cash. Unlike traditional equity loans, you receive payments instead of making them. If you are a homeowner on Long Island, a reverse mortgage may be an option for you! To be considered eligible for a reverse mortgage, you must be a homeowner aged at least 62 years or older and you must occupy the property as your principal residence.

Expert Advice:

No income, employment or credit requirements and needed. The cash advances can be used for any purpose, and do not affect Social Security, Medicare SSI or Medicaid benefits.

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Mortgage

A debt instrument, secured by the collateral of specified real estate property. The borrower is obligated to pay back the mortgage with a predetermined set of payments. These are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of time, the borrower repays the loan, plus interest, until they own the property outright.

Expert Advice:

Purchasing a New, Second or Investment home should be one of the most exciting and rewarding times in your life. It takes you months of searching and research to find that perfect home. The last thing you need is for your financial process to give you problems. That’s why here at Affordable Financial Services, we offer a variety of home purchase loan programs.

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These materials are not from HUD or FHA and were not approved by HUD or a government agency.

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