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Fixed Rate Mortgage

  • 30-Year Fixed Rate

    The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

    15-Year Fixed Rate

    This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you’ll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn’t that great.

    Considerations

    There is typically a tradeoff when it comes to choosing a mortgage between risk and reward, or between an adjustable-rate mortgage and a fixed-rate mortgage. Depending on market conditions (the shape of the yield curve), an adjustable-rate mortgage might have a large initial payment advantage over a fixed-rate mortgage. However, if such a scenario exists, there is a probability that the payments on the adjustable-rate mortgage will rise over time. Mortgage borrowers need to understand and measure risks when deciding between an adjustable-rate and fixed-rate mortgage.

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Adjustable Rate Mortgages (ARM)

  • When it comes to Adjustable Rate Mortgages (ARMs) there’s a basic rule to remember…the longer you ask the lender to charge you a specific rate, the more expensive the loan.

    A variable-rate mortgage, also commonly referred to as an adjustable rate mortgage or a floating-rate mortgage, is a loan in which the rate of interest is subject to change. When such a change occurs, the monthly payment is “adjusted” to reflect the new interest rate. Over long periods of time, interest rates generally increase. An increase in interest rates will cause the monthly payment on an adjustable-rate mortgage to move higher.

    Advantages

    Variable-rate mortgages have enjoyed a surge in popularity as a result of increasing home prices. With the price of housing skyrocketing, many would-be homeowners are being priced out of the market when they attempt to cover the costs of a new home with a traditional, fixed-rate mortgage. Variable-rate mortgages have lower initial interest rates than fixed-rate mortgages, resulting in lower monthly mortgage payments.

    Qualifying for a variable-rate loan tends to be easier than qualifying for a fixed-rate loan because the payments are more affordable. This situation is particularly valuable when interest rates are high because lower payments enable buyers to afford more expensive homes.

    Variable-rate mortgages have a set period of time during which an interest rate that is lower than the rate available on a fixed-rate mortgage remains in effect. This is commonly referred to as an introductory, or teaser, rate. This time period varies depending on the loan. After this period, the rate on the mortgage will vary based on the prevailing rates in the market.

    Variable-rate mortgages are much more flexible than their fixed-rate counterparts, enabling buyers to choose terms that provide a lower initial payment for periods ranging anywhere from one month to 10 years.

    Such flexibility enables buyers to account for things such as bonus payments, expected inheritances and economic environments where interest rates are falling, in which case the interest rate and monthly mortgage payment can actually decline over time. Variable-rate mortgages also provide lower monthly payments for people who do not expect to live in a home for more than a certain number of years and those who expect to be able to pay off their mortgages rapidly. (For related reading, see Mortgages: Fixed-Rate Versus Adjustable-Rate.)

    Disadvantages

    One of the biggest risks for a homebuyer with a variable-rate mortgage is payment shock, which happens with interest rate increases. If interest rates increase rapidly, homebuyers may experience sudden and sizable increases in monthly mortgage payments, which they may have difficulty paying.

    Another potential disadvantage of  adjustable rate mortgages is that they are significantly more complex than their fixed-rate counterparts. Because they are available in a variety of terms, choosing the right loan can be a challenge. Costs aren’t easily compared, interest rates vary significantly by lender, shifting interest rates make it difficult to predict future payments and payment adjustments can make budgeting a challenge.

    Some of these loans provide a period of time during which the borrower pays only the interest on the loan. When the loan’s principal comes due, particularly if interest rates have risen, the amount required to service the monthly mortgage payment can increase by 100% or more. Also, many of these loans have complex terms, including penalties for loan prepayment and excessive fees for refinancing.

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Refinance / Choose Your Term

  • What is Refinancing?

    Getting a new mortgage loan to replace the original is called refinancing. Refinancing is done to allow a borrower to obtain a different, and even better interest term and rate. The first loan is paid off, allowing the second loan to be created, instead of simply making a new mortgage and throwing out the original mortgage. For borrowers with a perfect credit history, refinancing can be a good way to convert a variable loan rate to a fixed, and obtain a lower interest rate.

    One of the main advantages of refinancing regardless of equity is reducing an interest rate. Often, as people work through their careers and continue to make more money they are able to pay all their bills on time and thus increase their credit score. With this increase in credit comes the ability to procure loans at lower rates, and therefore many people refinance for this reason. A lower interest rate can have a profound effect on monthly payments, potentially saving you hundreds of dollars a year.

    Second, many people refinance in order to obtain money for large purchases such as cars, education or to reduce credit card debt. The way they do this is by refinancing for the purpose of taking equity out of the home. A refinance with cash out is a great way to fund expenses at a low interest rate.

    Choose Your Term Mortgage

    Choose Your Term simply means you can pick the number of years you would like for your term. You can choose 8 years up until 30 years and any term in between! By having the ability to Choose “Your Term Mortgage” you can make your mortgage fit your needs by one or more of the following methods:

    1. 1. Save money on your monthly payment
    2. 2. Decrease your mortgage term to get your mortgage paid of sooner
    3. 3. Increase your term to make your monthly payment lower
    4. 4. Cash out to pay debt items or make improvements in your home possibly keeping or still saving money on your payment

    Remember you have the option of doing all of this with no out of pocket closing costs!!

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Federal Housing Administration (FHA) Loan

  • What Is an FHA Loan?

    An FHA loan is a mortgage loan that is insured by the Federal Housing Administration (FHA). Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments.

    The FHA program was created in response to the rash of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help stimulate the housing market by making loans accessible and affordable. Nowadays, FHA loans are very popular, especially with first-time home buyers.

    What Are the Advantages of FHA Loans?

    Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. An FHA down payment of 3.5 percent is required. Borrowers who cannot afford a traditional down payment of 20 percent or can’t get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario. Another advantage of an FHA loan is that it can be assumable, which means if you want to sell your home, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.

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Veterans Administration (VA) Loans

  • What is a VA loan?

    VA Home Loans are offered for a variety of different borrowers. Some of the types of borrowers that qualify are veterans, active duty personnel, some specific National Guard and reservist service members. Surviving spouses of persons who die on active duty or as a result of disabilities connected with service are also eligible. In some cases spouses of active duty service members who are forcibly detained by a foreign government, captured in the line of duty, or missing in action may also be eligible.

    The way a VA loan works is pretty simple. To get a VA loan you have to get a loan through a private lender. After you do that, the VA essentially “stands behind” the loan. This assures the lender that if you can no longer make payments or something goes wrong, they can ask the VA to cover any losses they might have. In other words, the loan guaranty provided by the VA is a form of insurance provided to the lender to make them more inclined to give out a loan. Almost all of the loans are handled by lenders and the VA is rarely involved in the whole loan approval process.

    There are some pretty distinct advantages to taking advantage of a VA loan. With a VA loan you must still qualify for the loan you are seeking in terms of credit and income, but in many cases you can buy a home without having to make a down payment. This takes away a lot of the difficulty of buying a home as many people have to save for years just to be able to afford their down payment. To get the loan without a down payment, you have to make sure that the value of the home is greater than or equal to the sales price. In addition to this, because of the insurance provided by the VA, you do not have to buy private mortgage insurance when purchasing a home. There is also a limit, imposed by VA rules, to the amount of money you can be charged for closing costs. Keep in mind that closing costs may be paid by the seller, and you should take this into account when negotiating the sales price of a home. Another big advantage to a VA loan is that the lender cannot charge you a penalty if you pay the loan off early, and in some cases the VA may provide you with some assistance if you have difficulty making payments.

    To get a VA loan you do not have to be a first time home buyer. In addition, keep in mind that you can reuse the benefit any time you are purchasing a home. Also, as long as the person assuming a loan qualifies, VA loans are themselves assumable.

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Jumbo Loans

  • What is a jumbo loan?

    • A loan is considered jumbo if it exceeds the conforming and conforming high-balance loan limits.
    • The current conforming loan limit for a single-family home is $417,000 for all states – except Hawaii and Alaska, where it is $625,500
    • In federally designated high-priced markets in the continental United States, conforming high-balance limits range from $417,001 to $625,500 and, in designated markets in Hawaii, from $625,501 to $721,050. To note, conforming high-balance loans typically have higher interest rates, stricter underwriting and larger down payment requirements than standard conforming loans, but are generally priced lower than jumbo loans. Additionally, limits may be different for multi-unit properties.

    Jumbo loan considerations

    • Jumbo loans are available for primary residences, second or vacation homes and investment properties, and are also available in a variety of terms
    • Jumbo loans are available as fixed-rate or adjustable-rate loans
    • Jumbo loans may have higher interest rates than conforming and conforming high-balance home loans and can have stricter underwriting and larger down payment requirements.
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Reverse Mortgages

  • Although there are different types of reverse mortgages, all of them are similar in certain ways. Here are the features that most have in common.

    Homeownership

    With a reverse mortgage, you remain the owner of your home just like when you had a forward mortgage. You are still responsible for paying your property taxes and home-owner insurance and for making property repairs.

    When the loan is over, you or your heirs must repay all of your cash advances plus interest. Reputable lenders don’t want your house; they want repayment.

    Financing Fees

    You can use the money you get from a reverse mortgage to pay the various fees that are charged on the loan. This is called “financing” the loan costs. The costs are added to your loan balance, and you pay them back plus interest when the loan is over.

    Loan Amounts

    The amount of money you can get depends most on the specific reverse mortgage plan or program you select. It also depends on the kind of cash advances you choose. Some reverse mortgages cost a lot more than others, and this reduces the amount of cash you can get from them.

    Within each loan program, the amounts you can get generally depend on your age and your home’s value:
    • The older you are, the more cash you can get; and
    • The more your home is worth, the more cash you can get.

    The specific dollar amount available to you may also depend on interest rates and closing costs on home loans in your area.

    Debt Payoff

    Reverse mortgages generally must be “first” mortgages, that is, they must be the primary debt against your home. So if you now owe any money on your property, you generally must either:
    • pay off the old debt before you get a reverse mortgage; or
    • pay off the old debt with the money you get from a reverse mortgage.

    Most reverse mortgage borrowers pay off any home debt with a lump sum advance from their reverse mortgage. You may not have to pay off other debt against your home if the prior lender agrees to be repaid after the reverse mortgage is repaid. Generally only state or local government lending agencies are willing to consider “subordinating” their loans in this way.

    Debt Limit

    The debt you owe on a reverse mortgage equals all the loan advances you receive (including any you used to finance the loan or to pay off prior debt), plus all the interest that is added to your loan balance. If that amount is less than your home is worth when you pay back the loan, then you (or your estate) keep whatever amount is left over.

    But if your rising loan balance ever grows to equal the value of your home, then your total debt is generally limited by the value of your home. Put another way, you generally cannot owe more than what your home is worth at the time the loan is repaid.

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Portfolio Loan

  • What is a portfolio loan?

    A portfolio loan is a loan that is serviced by the lender that issued the money. In many cases, loans that are issued by a lender are packaged together with other loans and sold in the secondary market. With a portfolio loan, the lender that initially wrote the loan is going to hang onto it and keep it as part of their investment portfolio.

    Benefits

    If a lender keeps your loan as part of their portfolio, it can benefit you overall. Instead of having to work with a lender that is going to service your loan from another location, you will be able to keep your relationship with the lender that you originally worked with. By doing this, you will be able to contact them whenever you have a problem. Your customer service experience should improve.

    Good Credit

    Typically, those that have a good credit score and are considered to be a good credit risk are those that are considered to be eligible part of a portfolio. Lenders like to keep those that have a good credit history on hand because it lowers the amount of risk in the portfolio.

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