Home Mortgage Loan Types
Fixed Rate Home Mortgage Loans - If you would like the security of never having your monthly payment change, this is the mortgage that you will prefer. Your mortgage rate and payment are fixed for the life of your loan, whether the loan is 10, 15, 30 or 40 years. With current low rates on fixed rate home mortgages, this is an ideal solution for most borrowers. When rates are high, it sometimes makes sense to use an adjustable rate in hopes of lowering future interest costs.
FHA Home Mortgage Loans - FHA home mortages are loans insured by the Federal Housing Administration. Typically, FHA mortgage rates are often lower than comparable conventional mortgage loans. FHA backed home mortgage loans offer benefits such as down payments as low as 3.5%, easier qualification guidelines, and easier access to lenders, especially in tough mortgage markets as we are seeing in 2009-10.
Cash Out Home Mortgage Loans - If you need or want to make a substantial purchase or investment, using your home’s equity can be the least expensive option. Whether for college costs, unexpected medical expenses, the vacation of a lifetime, or a room addition, you can refinance your home mortgage loan to get cash for these purposes. You may find it more cost effective to use a Home Equity Line of Credit (HELOC), a traditional second trust deed, or refinance the first trust deed. We can help you with that decision.
Debt Consolidation Home Mortgage Loans - You may be paying very high interest on auto, personal lines, second trust deeds, credit cards or other financing. Any interest rate you are paying above 7 or 8% is substantially higher than what you would be paying using a mortgage. Refinancing your home mortgage loan to consolidate other debt under one low mortgage rate can save you money and lower your monthly payments. Interest on home loans is tax deductible. An additional saving (or, effectively a further rate reduction) you don’t get with credit cards, car leases and the like.
Adjustable Rate Home Mortgage Loans - In some markets it may make sense to lower your monthly mortgage loan payment during the early years of your mortgage. Mortgage rates for ARMs are usually lower in the early years than traditional fixed rate programs. This can be especially true if you plan on selling or refinancing your home in less than 10 years. However, some adjustable rate home mortgage loans do not amortize fully or may even include reverse amortization. This means that you are not increasing the equity in your home as fast as you would in a conventional loan. If you lock in a rate for several years only, you risk interest rates increasing which in turn could result in your monthly payments going up.
Interest Only Home Mortgage Loans - Interest only home mortgage loans lower your initial monthly payments. Besides helping your cash flow, this might allow you to leverage your funds to qualify for a larger loan amount than a loan that includes payments on the principle. One downside: you don’t generate equity in your home through paying down the principle.
Divorce Buyout Home Mortgage Loans - Divorce Buyout Mortgage are designed to provide a vehicle for one spouse to keep the house, get cash out if needed for any purpose, including paying off the other spouse, and remove the other spouse’s name from the current home loan.
What is a mortgage broker? What are the benefits of using a mortgage broker?
A mortgage broker is a company that has relationships with lenders and their products in much the same way that an independent insurance agent has access to many different insurance providers. Through these relationships mortgage brokers are offered mortgages at wholesale prices. As a result, the broker can now offer the lowest rates on the market by using the lender offering the best interest rates and other costs on that particular day that fit the needs of their clients. The broker can also choose to operate on lower margins or profit than other banks or lenders. Good brokers and their agents remain up-to-the-minute on a vast array of products from their providers. Direct lenders have only a limited number of loan products available. The broker does all of the processing of the loan. Since Guaranteed Rate funds most of its own loans it usually underwrites each loan as well. At traditional banks, employees work for the bank, not for you. Consequently, in difficult situations a direct lender is likely to say they can’t do it (“Next!”) and leave you to solve any problems. Experienced brokers have a fiduciary responsibility to their client and will find a way to get it done.
What is an interest rate lock and how does it work?
An interest rate lock guarantees your interest for a set amount of time, typically 30 days. The lock does not obligate you to the loan nor does it obligate the lender to fund. It merely eliminates the risk of interest rates increasing while final negotiations are in process. If interest rates fall, we may be able to re-lock at the lower rate. Since the lender is absorbing the risk of losing out on any increase in rates, the cost of the lock varies directly with its duration. Therefore, when you shop for mortgages, a 5% interest rate with a 45 day lock is a better deal for you than a 5% interest rate with a 30 day lock. Once a lender receives your application, an interest rate can be locked. When to lock and for how long is entirely up to the client, naturally in consultation with the broker. When locked, your interest rate is guaranteed as long as you are approved prior to the lock’s deadline.
What is PMI and do I need it?
Private Mortgage Insurance (PMI or MI) is a protection to the lender against the borrower defaulting. It is mandatory for all FHA backed loans and for any conventional loan that is more than 80% of the property’s value. Because some buyers don’t have 20% of the value of the home they can lay out in cash, there are programs that allow for a smaller down-payment because the borrower will buy MI. The reason lenders don’t require it for all loans is that they know that borrowers who have at least a 20% stake in their homes default less often than borrowers with less equity. The payment is included in your mortgage payment if your loan requires PMI or MI so that the lender knows that it is being paid on time.You can cancel mortgage insurance without refinancing. Generally, there is a minimum number of years it’s required. When you have established a 22% equity in your home and you haven’t missed a payment in the past 12 months, you can get your mortgage insurance requirement removed by the lender.
Why is my Annual Percentage Rate (APR) different from my interest rate?
APR includes some of the closing costs that must be paid when acquiring a loan. The APR is the cost of credit expressed as an annual rate after including “points” and other closing costs and fees. These fees are included in the APR to give an “adjusted” percentage rate so you can compare loans and lenders.
What is a Good Faith Estimate?
This is a legal disclosure that every lender provides the borrower within 3 days of application. This estimate details the types of fees and the amounts you will be paying in acquiring the loan for your property.