When it comes to financing the purchase of your new home or refinancing an existing home, picking the right loan product is critical. Products vary from term, qualifying guidelines, loan amount, and down payment. Choosing the right product that’s right for your situation will make the loan application process and qualifying much easier.
FIXED: Fixed monthly principal and interest payments. Your principal and interest payment stay the same for the term on the loan. Terms are typically for 30,25,20,15 or 10 years. This options is for those you may stay in their homes for several years. Qualifying is based on note rate/payment and is typically those loans sold to FNMA and FHLMC, therefore automated underwriting is used.
ARMS: Adjustable rates are typically lower than fixed rates. Adjustable rate mortgages are amortized over 30 years however, they have a term that is fixed and thereafter, rates can changed each year. Terms are typically 3/1. 5/1.7/1 or 10/1. The rate remains the same for the initial term and then can adjust thereafter. There are caps on the adjustments periods as well as over the life of the loan. ARMS are adjusted based of a variable (index) and a constant (margin). Qualifying is based on a rate higher than the initial rate due to the potential of the rates going up in the future. This options is typically for those who initially want or need a lower payment and/or for those who may not be in the home for a long period of time.
HARP: Home Affordable Refinance Program, is a product available to you if FNMA or FHLMC own your current loan. It allows you to refinance your home if you cannot refinance traditionally due the decline in value of your home. You must be current on your mortgage payment and your file will need to be fully processed as with other loan programs. There are times that an appraisal may not be required. Check to see if your loan is owned by FNMA or FHLMC to see if this is an option for you.
FNMA 1-800-7FANNIE (8am to 8pm EST) www.knowyouroptions.com/loanlookup or
FHLMC: 1-800-FREDDIE (8am to 8pm EST) www.freddiemac.com/mymortgage
JUMBO LOANS: These loans are to be considered for those who wish to borrow more than conforming loan limits, $417,000(single family) Jumbo loans are offered for both Fixed Rates and Adjustable rate mortgages. Generally the underwriting is stricter and requires more documentation. Qualifying total debt ration typically cannot exceed 40%. In some cases, two appraisals are required.
FHA: The Federal Housing Administration (FHA) offers either fixed rate or adjustable rate mortgages. The features and guidelines of the program is more flexible for those borrower that are eligible. The down payment is much lower for FHA loans, with as little as 3.5% down. FHA loans are insured by the government. The cost to insure (MIP) is required as an upfront cost that can be financed as well as paid on a monthly bases. If can be more costly than conventional financing, however, the flexibility and low down payment may be what you need in order to purchase or refinance your home.
VA: The Veterans Affairs offer residential mortgage that are guaranteed and available to Military Service veterans, currently on active duty service men and women and their surviving spouses. This program allows for zero down payment(as long as the sale price does not exceed the appraised value) and does not have monthly mortgage insurance, closing costs are limited, closing costs may be paid by the seller, there are no prepayment penalties if you pay your loan off early, and the loans may be assumable. to be eligible for a VA-guaranteed home loan, you must have satisfactory credit, sufficient income and a valid Certificate of Eligibility (COE) and the home must be used for your primary residency.