Thirty-Year Fixed Rate Mortgage
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.
Fifteen-Year Fixed Rate Mortgage
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.
Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)
These increasingly popular ARMS—also called 3/1, 5/1 or 7/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It's a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.
Adjustable Rate Mortgages (ARM)
When it comes to 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.
2/1 Buy Down Mortgage
The 2/1 Buy-Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long-term rates. However, keeping the loan in place even for three full years or more will keep their average interest rate in line with the original market conditions.
This loan has a rate that is recalculated once a year.
With this loan, the interest rate is recalculated every month. Compared to other options, the rate is usually lower on this ARM because the lender is only committing to a rate for a month at a time, so his vulnerability is significantly reduced.
Types of Loans
A government mortgage that is insured by the Federal Housing Administration (FHA). These Loans have been insured by the FHA since the creation of the agency in 1934. Since then, various Housing and Community Development Acts have been passed which have slightly altered the the laws regarding FHA loans. FHA loans have been particularly helpful for individuals who typically otherwise would not have been able to secure a loan from another source due to low income or high risk. In today's market, FHA loans are one of the more popular options. They allow for as little as a 3.5% down-payment and down to a 620 FICO (credit) score. Furthermore, FHA loans typically carry lower interest rates than their conventional counterparts, especially at high LTV's; or Loan to Value Ratios. Loan amount divided by the appraised value of the home.
FHA Streamline Refinance
FHA has permitted streamline refinances on insured mortgages since the early 1980's. The "streamline" refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction even though most brokers will set it up as a no cost loan or "no out of pocket" expenses. Many lenders offer streamline refinances that do not require appraisals, income documentation, asset documentation and some even do not require a credit score. To be eligible you must currently have an FHA mortgage, and the streamline refinance must save you 10% or more per month in principle, interest, taxes and homeowners insurance payments.
A type of federally insured mortgage product for individuals who want to rehabilitate or repair a damaged home that will become their primary residence. in addition to the funds to cover the purchase price of the house, the FHA 203(k) loan provides the money needed for repairs and related expenses as part of the loan.
A government home loan guaranteed by the U.S. Department of Veterans Affairs (VA) under the Servicemen's Readjustment Act of 1944 and later. The VA guarantees restitution to the lender in the event of default. The amount of guarantee available has been raised on a regular basis. The home must be the borrower's primary residence. VA loans allow for as little as 0% down to eligible veterans.
A USDA guaranteed loan is a government insured, 100% financing purchase loan. These loan DO NOT carry monthly mortgage insurance. These loans are offered in rural areas and serviced by direct lenders that meet federal guidelines. There are combined household income limits as well as property eligibility lists by town. Please visit the link below to see if a property you are looking at is eligible. From section 502 of HUD:
Fannie Mae/Freddie Mac
These loans are commonly referred to as "conforming" or "conventional" loans. Most lenders use Fannie Mae and Freddie Mac guidelines to underwrite their loans. The reason for this? They want to make them eligible for sale on the secondary market. Mortgages are often bunched together in Mortgage Backed Securities (MBS) and sold, the terms of the loan stay the same, just the servicer changes. They are both Federally chartered "semi-governmental" companies that purchase these pools of loans from lenders and sells these securities to investors. They are the largest source of home mortgage funding in the United States. These loans have a max loan amount of $417,000, and if the property has less than 20% equity in it they require Private Mortgage Insurance to be obtained. For example, if you purchased a home with a 10% down-payment you would be required to obtain "PMI", which is in the form of a monthly payment. These "PMI" companies guarantee investors against default. Within the umbrella of Fannie Mae and Freddie Mac, there are dozens of sub-products aimed at particular borrowers. Please give us a call to see what makes the most sense for you and so we can navigate you through all of these available programs.