If you choose an Adjustable Rate Mortgage (a.k.a. "ARM"), it is crucial to be fully congizant of the terms of your loan. There are two main types of ARM's, Hybrid ARM's and Option ARM's. Hybrid ARM's have a rate that is fixed for a period of time, and then it adjusts. Option ARM loans (a.k.a. Negative Amortization loans) have two interest rates for 5 or 10 years, the minimum payment rate and the actual accrual rate. For a complete description of each, please refer to the "Consumer Protection" tab.
The forms I created ask the lender to clearly describe all the terms of your Hybrid or Option ARM loan. They also ask the lender to help you understand the potential risks and rewards of your particular loan by calculating the highest and lowest payments you can expect to experience when your loan adjusts.
The Fixed Rate Loan Description is most important if you have a fixed rate loan with an interest only option for a period of time, before you have to pay principal and interest. If you have a fully amortized, fixed rate loan, and a loan officer you trust, it is not necessary to ask them to complete the "Fixed Rate Loan Description" form; because there will be no surprises.
I am working on an online calculator that will do all of this for you. Until that time, these forms will help.
Closing Agent Fee Agreement
Closing Agents often add unnecessary fees to transactions ("junk fees"). If you are purchasing a home, it is a good idea to ask the Escrow Officer or Attorney to complete and sign this form. When you clarify fees up front, you have a lot more leverage in negotiation. Waiting until the end to discuss fees makes it more difficult to get junk fees removed.
I created this form many years ago to help borrowers avoid becoming victims of bait-and-switch lending practices. The regulations that took effect January 1st, 2010 go a long way toward accomplishing that goal.
The new Good Faith Estimate is more legally binding than the old one. That is good. However, it is also more complicated. Many borrowers have trouble understanding it.
If you would like a clearer explanation of the terms your loan officer is offering you, ask him or her to complete this form. It is in plain English.