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Loan Programs
Each loan program is unique, so become familiar with the details of the programs available to you.
What's the best loan program for you? Consider the following:
- How important is payment certainty? If knowing that your payment will be the same every month is important, consider a fixed-rate mortgage.
- How important is rapid equity buildup? If rapid equity buildup is a factor, consider a shorter amortization period, such as a 15-year, fixed-rate mortgage.
- Do you anticipate increasing or stable income? If income growth is anticipated, you could take advantage of a lower start rate on an ARM or a temporary buy down.
- Other factors to consider include:
- ability to qualify at market rates for loan amount selected
- anticipated term of occupancy
- possibility of significant rate changes
- existence of up-front costs
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15- and 30-Year Fixed-Rate Mortgages
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- Interest rate does not change.
- Principal and interest (P & I) does not change.
- Fixed-rate mortgages fully amortize over a defined period of time and are paid in-full at the end of the loan term.
- Different loan terms are available (15- and 30-year terms are most popular).
- The shorter the term, the faster equity is built and the loan is paid off.
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Fixed-Rate Balloons
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- P & I payment and interest rate do not change.
- Regular monthly P & I payments are based on 30-year amortization, while the unpaid balance (balloon) is due at the end of a shorter, predetermined term, typically 5, 7 or 10 years.
- Interest rate is typically less than fixed-rate loans.
- Most borrowers anticipate refinancing or selling prior to the end of the balloon term.
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Fixed-Rate with Temporary Buydown
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- Borrowers or the seller may pay to temporarily "buy down," or lower, the interest rate.
- Decreased interest rate reduces the monthly payment.
- Lower interest rate may help borrowers qualify more easily; qualifying factors may vary.
- Interest rate/payment is typically reduced for 1, 2 or 3 years
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Interest-Only Mortgages
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- There are no reductions to the principal amount.
- There is no provision for negative amortization.
- Payments may increase up to an amortized amount, but the loan balance itself does not increase.
- Generally, interest-only payments are limited to the first 5, 10 or 15 years of the loan.
After that, the loan is amortized for the remainder of its term
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Adjustable-Rate Mortgages (ARMs)
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- There is potential for the interest rate/ payment to fluctuate.
- ARMs transfer to borrowers a portion of the risk associated with a changing economy.
- In exchange for sharing the risk, ARMs offer borrowers initial interest rates that are substantially lower than fixed-rate mortgages.
- The lower interest rate may help borrowers qualify more easily; qualifying factors may vary.
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It's wonderful to see you are planning ahead. Most people will insist on looking for a home before knowing what they can comfortably afford and qualify to buy. There wiil be basic questions that your lender will need the answers from you before they are able to give you a preliminary qualification letter. 1) How much do you make annually; do you have any other income besides a full time job? 2) How long have you been with your current job; where were you previously employed and for how long? 3) Have you filed for bankruptcy protection in the past seven (7) years? 4) What are your current monthly obligations? Rent, Credit Cards, Auto Payments, etc. 5) Do you have money saved for a down payment; 3% to possibly 20% of the purchase price based on the loan program you decide upon? 6) Are you planning on staying in this home for five (5) years or more? If you have not spoken with a lender and are in need of a referral, I can provide you with several quality contacts.
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For assistance in locating a local lender
call (702) 286-7653 or (877) JANE 221
email jane@janeshouses.com
DISCLOSURE:And as always if you have your own 'qualified' lender or banking institute to finance your next mortgage through then contact them and tell them you want a pre-qualification letter as you are ready to purchase a new home or another investment property.
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