Mortgage Loans 101

Finding a lender, determining how much you can borrow, and deciding on the right loan program for YOU is one of the most important parts of the home buying process. Below is a brief summary of each kind of loan that a lender may provide. Every lender has different options available to them, and can help YOU find the loan that best suits YOUR needs! Need a referral? Please feel free to contact me help in your home buying process. 

Fixed Rate Mortgage

• Interest rate as well as monthly principal & interest (P&I) payments remain the same for the life of your loan.
• Often times a good choice for those homeowners planning to live in their home for several years.
• Generally available in a variety of term lengths, i.e. 10, 15, 20, 25, and 30 year terms.
• Protects from the possible rise in mortgage rates for the life of the loan.

Adjustable Rate Mortgage Loan

• Interest rate as well as monthly principal & interest (P&I) payments remain the same for an initial period (typically 5, 7, or 10 years) then adjust annually.
• Often attractive to buyers who plan to be in their home for a short period of time or know their income will increase in the future.
• Typically have a lower initial interest rate, but can become higher over time depending on market fluctuations.
• Loans available in a variety of term lengths, i.e. 10/1 year, 7/1 year, 5/1 year, 3/1 year programs.
• Includes an interest rate cap which sets a limit on how high the interest rate can increase.

FHA Mortgage Loan

• Private loans insured by the federal government.
• Down payment options as low as 3.5% for borrowers.
• Available in a variety of fixed rate and adjustable rate loan options.
• May allow you to use a gift or a grant for all or a portion of your closing costs.
• Borrowers are required to pay mortgage insurance, which slightly increases the monthly payment.
• Income and credit are often less of an issue with this program and helpful to borrowers who many have low credit scores, various job changes, etc.

VA Mortgage Loan

• Available to qualified military veterans, reservists, active duty personnel, and/or eligible family members.
• Only available for personal primary residences and cannot exceed a $417k loan limit.
• Typically requires a one-time VA funding fee that can often be financed into the loan.
• Available in a variety of fixed and adjustable rate loan options.
• Does NOT require monthly mortgage insurance premium.
• Private loans insured by the federal government.
• Allows closing costs to come from a gift or grant.
• Provides low and/or no down payment options.

USDA Mortgage Loan

• Government funded program that allows borrowers to typically put 0% down on a home.
• Income limitations, i.e. borrowers are not able to make more than a certain amount to qualify.
•  Excellent option for individuals with a lower income or less than perfect credit.
• Available to borrowers who are seeking to purchase in “rural areas”
• 30 year fixed rate term with NO mortgage insurance required.

Jumbo Loan

• Non-conforming loan typically for amounts higher than $417K.
• Similar loan programs compared to fixed, adjustable and FHA.
• Interest rate is generally higher due to the typical lending amount and risk placed on the lender.

Construction Loan

• Short term loan that converts to a permanent loan upon completion of the home.
• Great for a borrower who already owns land, whereas the land can often be used as collateral.
• During construction money is dispersed and the borrower is charged interest based on the amount dispersed.

Need help or have more questions?  Contact me  today and I can point you in the right direction. Let me help YOU make YOUR dreams of home ownership come true.