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How the Intelligent Mortgage Agent (TM) Works

The Intelligent Mortgage Agent (TM) algorithm will do the following:

  1. Eliminate programs for which you are not eligible. You are not eligible for a conforming loan if your loan is too large. Some loans require a larger down payment than the usual minimum of 5 percent.

  2. Look into the future and project changes in the rates on Adjustable Rate Mortgages (ARMs), based on the scenario you specify for "rates increase." What you specify is a change in market interest rates. Even if you specify no change in market rates, ARMs will adjust anyway, because ARMs typically start out below the rate at which they will adjust when they reach their fully indexed rate.

  3. Divide the points on the loan by the number of years you specify as your scenario for keeping the mortgage. This roughly averages in the points with the regular mortgage rate.

  4. Take the average mortgage rate (including points as averaged in during the preceding step) over the number of years in your scenario.

  5. Recommend the mortgage with the lowest average rate, given the interest rate outlook and years that you specified in your scenario.
You are strongly encouraged to try more than one scenario. People rarely know exactly how long they will be in a house, and hardly anyone thinks that they know exactly where interest rates are going. By trying a number of scenarios, you can assess the range of possible outcomes. The real benefit of the Intelligent Mortgage Agent is to enable you to see how these factors affect the average interest rate on different mortgage instruments.
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