Mortgage
Loan Programs - Which Mortgage Loan is Right for Me?
Conventional
/ Conforming / Non-conforming
Many
people are sometimes confused and even misinformed on what
these three terms really mean. A conventional loan is any
loan that is not insured by FHA or guaranteed by VA.
A
Conforming loan is a loan that meets strict standards concerning
loan amount, down payment, income, credit history and property
condition. These loans have the lowest rates available, Fannie
Mae and Freddie Mac.
Non-conforming
loans are those that do not fit into these strict standards
and of course they have slightly higher interest rates.
Which
mortgage loan is right for me?
FIXED
RATE (10, 15, or 30 YEAR) There is very little risk with a
fixed rate loan as the interest and payments stay the same.
If you can qualify for a shorter term, 10 or 15years, it will
save you a small fortune in interest over the life of the
loan. Keeping that in mind, a fixed rate mortgage should only
be considered if you are planning on staying in the home for
10 years or longer. If not, an adjustable rate mortgage might
really be better for you.
ADJUSTABLE
RATE loans generally have a lower interest rate than a fixed
rate but they are riskier because the rate adjusts to the
market and your payments will change. There are only two reasons
to get into an adjustable rate mtg. To qualify for a bigger
house… lower rate and payments, or if you know you are
going to be in the house for a specified period of time. If
you know you are going to move in three yrs then a 3/1 arm
would be good for you. A 3/1 is fixed for 3 yrs then adjusts
every year after that. So… You would have a lower rate
and would move before the rate starts adjusting. Adjustable
rate mortgages come in all shapes and sizes; 1 year, 3/1,
5/1, 7/1, 10/1. Be sure to give yourself enough room for delays
in your plans. Be aware some of these loans have a prepayment
penalty you need to ask about.
BALLOON
MORTGAGES are very very risky loans. If anything happens in
your life that changes your ability to pay off the balloon
or refinance it, you could lose your home. It happens! Balloons
usually have lower rates and the balloon or balance is due
in 5, 7, or 10 years. Which ever you choose. When the balloon
is due and you refinance, you will have to pay closing cost
on a new loan so I'm not sure you will really save any money
on the implied lower rate.
Besides
standard loan programs, there are a large number of unique
programs:
·
0 down payment
· Piggyback loans 80-10-10 or 80-15-5. No PMI payments
even with 5% or 10% down.
· No income, No asset verification
· Lease Purchase
· Debt consolidation programs
· Home Improvement loans
· Home Equity Line of Credit
· Stated Income
FHA
loans are some of the best loan products on the market. If
you have slightly less than perfect credit you may still qualify
for these loans. The rates may be slightly higher than conventional/conforming
loans, but MUCH lower than nonconforming loans. They require
only 3% down payment and have special programs that will allow
the 3% down to be a gift. FHA is really a blessing to a large
percentage of homebuyers. In fact, that is why they were created,
to expand the American dream of home ownership. Even low credit
scores will work with FHA if payment history and other guidelines
fall into place. FHA does allow some late payments. Believe
it or not, …it is possible to get a loan with FHA even
if you are in chapter 13 bankruptcy!!
FHA
guidelines are very complicated and so different from conventional
loans that I could never cover it all. That is why it is so
important that you find a mortgage company that offers FHA
loans. Not all mortgage companies or banks do them because
they are so different and because they must be specially approved
to offer these products.
If
you go to a company that does not offer FHA. You could be
put into a loan with a much higher rate than you qualify for.
I have seen it countless times!!
VA
Loans: VA loan credit requirements are much stricter than
FHA and closely resemble conventional loans. I think the only
major advantage to VA is the zero down payment requirement,
and you can refinance VA to VA quickly at a much lower cost.
. VA loans may take longer to close than other loans and their
appraisal and inspections requirements are also very strict.
Many sellers will not consider selling VA because of the home
repairs and red tape. |