A stated-income mortgage is a “low-documentation” loan in which you’re not required to provide documented proof of your income. You must have verifiable employment, and you must have assets.

Stated-income mortgages are great for small business owners, and people who work on commission or are self-employed. With this type of loan, your income doesn’t have to be proven. The lender takes you at your word as to your stated income, and can only verify whether your reported income is in line with industry standards for your occupation.

Potential borrowers must have a mid- to high-level credit score, and must be able to verify assets. Most lenders require assets equal to six months of the stated income.

It’s possible to get a stated-income mortgage with as little as 5% down, but you’ll pay a higher interest rate. If you’re able to put 20% down, your interest rate will only be an eighth of a point to a quarter of a point higher than that of a conventional mortgage.

In most cases, balloon loans are not better than ARMs. There are risks associated with both types of mortgages, but those risks are greater with a balloon mortgage. Here are some reasons why:

First, there’s a large payment due at the end of a balloon mortgage. Unless you know you’ll be coming into a large sum of money before then, you’ll need to refinance the amount due.

Here’s an example: a 5-year balloon mortgage for $100,000 at 6.5% has a final payment of over $93,000. If you can’t pay it (and most people can’t), you’ll have take out a new loan for that amount. That could be tricky if property values decrease in your area. In addition, lenders don’t have to refinance a balloon mortgage if you’ve been late on even one payment in the final year.

Second, the initial rate on a balloon is usually higher than the introductory rate of an ARM. And you can easily avoid the higher “post-introductory” rate by refinancing the ARM to a fixed rate mortgage.

So the bottom line is this: regardless of whether you get a balloon loan or an ARM, you’ll likely refinance the loan. There’s more risk in trying to refinance a balloon mortgage, and if you’re unable to refinance, you have to pay that large lump sum or you could lose your house. If you’re unable to refinance an ARM, you may get stuck with a higher interest rate, but you’ll still have a mortgage and a house.

The VA loan program was introduced after World War II. Its purpose was to offer veterans the opportunity to own their own homes. The VA doesn’t lend money or issue mortgages. Instead, it insures mortgages, protecting the lender against any loss if the borrower defaults. Because VA loans are guaranteed they’re often easier to get.

VA loans are a good deal for several reasons. First, down payments are not required for VA loans. So it’s a great option if you can’t make a large down payment, or if you’d prefer to make a smaller down payment and keep some of your money in the bank.

There’s also no PMI with a VA loan. PMI means “private mortgage insurance.” If you pay less than 20% down on a conventional home loan, you’ll have to pay PMI until you have at least 20% equity in your house. Because VA loans don’t require 20% down, PMI isn’t an issue.

Additionally, VA loans offer competitive interest rates. This is probably the greatest benefit. Many lenders offer low- or no-down payment loans, but the interest rates are much higher. That VA loans can be gotten with little or no money down and at a competitive interest rate makes them a great deal!

Check eligibility requirements before pursuing a VA loan, as they are specific. If you are eligible, you’ll need a Certificate of Eligibility. Detailed eligibility information and certificate forms can be found at the U.S. Dept. of Veteran Affairs website.

An Energy Efficient Mortgage, or EEM, may provide home buyers with the ability to qualify for a larger loan than a traditional mortgage loan. Whether the purchase is a new or existing home, one that is already energy efficient or one that the buyer will make energy efficient following the purchase, the idea behind the EEM is simple.

A more energy efficient and therefore more affordable home enables you, the home buyer, to qualify for a larger loan. The EEM accounts for the home owner spending less money on energy consumption and applies that savings as income in underwriting the loan. Case in point: A mortgage customer with a gross income of $50,000 might qualify for a $187,000 home with a traditional mortgage loan, but with an EEM loan that figure could increase to a borrowing capacity of $202,000!

Qualifying for an Energy Efficient Mortgage is similar to qualifying for a traditional conforming mortgage. The underwriter considers the mortgage applicant’s credit score, debt to income ratio, ability to repay the loan, etc. – just like a traditional loan. The application process differs in that it begins with a HERS (Home Energy Rating System) report on the existing home or the plans of the new home being built. With new homes, the report identifies how energy efficient the home is, while with existing homes, the report identifies how the home’s energy efficiency can be improved through the installation of energy saving features.

For existing homes, the cost of the proposed efficiency updates can actually be financed through your EEM loan. When the HERS report is presented, it details the current energy efficiency of the home and provides a checklist of improvements that can be made to improve the home’s energy efficiency. Consumers can then borrow up to 15% of the home’s appraised value in order to make the energy efficient improvements. For a home that appraises at $200,000, you could finance up to $30,000 for energy efficient upgrades!

The important thing to understand about Energy Efficient Mortgages is that can potentially help borrowers leverage a slightly larger loan amount than they might otherwise qualify for. EEMs don’t necessarily impact the interest rate on the loan: As with any mortgage, the interest rate is tied to a buyer’s credit score. That said, there is a effort undertaken by the Energy Programs Consortium to enhance EEM products by offering reduced rates, but as of this writing that has not yet materialized.

Thus, the benefit of the current structure of Energy Efficient Mortgages EEM lies in the debt to income ratio adjustments that result from the underwriting process in an Energy Efficient Mortgage. The incentive for homebuyers to utilize EEM’s comes from realizing the benefit of lower utility bills, being able to qualify for a more expensive home and knowing that their home’s carbon footprint is as small as it can be.

Libor ARMs are only a good deal if the savings on the front end outweighs the risks of increased rates and payments later on.

Libor stands for “London InterBank Offer Rate”, and is the interest rate offered on banks in London which have large deposits of US money. The rates are fixed for a set time-period; typically 1 month, 3 months, 6 months, and 12 months. After that, rates are adjusted based on the current value of the Libor, plus a pre-determined margin.

For example, suppose you have a 3-month Libor ARM with an introductory rate of 3.15%, and a margin of 1.5%. At the end of the first three months, your new rate will be 1.5% plus the current rate of the 3-month Libor. So if the current rate is 3%, then your new rate is 4.5%.

If you’re considering a Libor ARM, find one that has an adjustment cap. Using the above example, if you have a rate cap of 1%, then your new rate is only 4.15%.

We recommend that you compare the features of a Libor to other ARMs before making a final decision. You need to do a careful comparison of rates, margins, and adjustment caps, in addition to other features. And, as always, we recommend that you talk with a reputable mortgage broker.