7 Year Balloon Mortgage

Mortgage Products

Fixed

ARM

Reverse

The 7-Year Balloon with a conditional refinancing option may be a good alternative for your customers. Monthly payments are attractive because they are based on a 30-year amortization, while yields are based on the shorter term of the loan. The conditional refinancing option provides a safety net, allowing borrowers to refinance at maturity with a 23-year fixed-rate mortgage, provided certain conditions are met.

The Target Audience for 7-year Balloons

This product may be ideal for borrowers who intend to remain in their homes for a short period of time. Also, borrowers whose financial objectives include lower initial monthly payments or the ability to qualify for a larger mortgage may also be candidates.

Consumer Benefits

Offers a lower cost fixed-rate financing alternative to 15- and 30-year fixed-rate mortgages.

Affordable monthly payments can be made even more attractive by pairing it with a temporary interest rate buy down.

For borrowers who:

A 7-year balloon delivers:

Plan to stay in their homes for less than 7 years

Balloons provide a lower cost fixed-rate financing alternative to 15- and 30-year fixed-rate mortgages.

Desire lower initial monthly payments

The affordable monthly payments can be made even more attractive by pairing it with a temporary interest rate buy down.

Plan to stay in their homes for more than 7 years

The refinance feature eases concerns about the availability of financing at loan maturity. Borrowers need not re-qualify if certain conditions are met.

Eligibility Criteria for Balloon Mortgages

Loan Purpose

Purchase money and "limited cash-out" refinance mortgages.

Loan Type/Term

Conventional fixed-rate, level-payment first liens with 7-year balloon terms amortized over 30 years.

Property Eligibility

• 1-4 unit principal residences

• 1 unit second homes

• 1-4 unit investor properties

• Co-ops, condos, PUDs, and leaseholds are eligible.

Maximum LTV/CLTV/HCLTV

(at origination)

Maximum LTVs ranging from 75- to 90-percent and limited cash-out refinance mortgages with maximum LTVs from 70- to 75-percent.

Qualification

Standard guidelines apply. The balloon mortgage must include a conditional refinancing option that the borrower may exercise when the balloon maturity date is reached.

MI Coverage

Mortgage insurance coverage of 12 percent is required for balloons with LTVs of 80.01-85 percent, 25 percent for balloons with LTVs of 85.01-90 percent, and 30 percent* with LTVs of 90.01-97.00%.

*35 percent in some cases.

Buy downs

Temporary interest rate buy downs are permitted.

Seasoning

Balloons delivered for whole loan must have a remaining term of at least five years at the time we purchase the mortgage.

Balloons delivered for MBS must have a remaining term of at least six years at pool issue date.

2006 Conforming Loan Limits

Number of
Units Maximum original
principal balance Alaska, Guam, Hawaii,
and U.S. Virgin Islands only

1 $417,000 $625,500

2 $533,850 $800,775

3 $645,300 $967,950

4 $801,950 $1,202,925

Your Texas Mortgage Rates

Lending Source

7 Year Balloon Mortgage

Mortgage Products

Fixed

ARM

Reverse

Consumer Benefits

Eligibility Criteria for Balloon Mortgages

Loan Purpose

2006 Conforming Loan Limits