Learning

Types Of Mortgage Programs

FHA Home Loan

An FHA Loan is a great solution for 1) a first-time homebuyer or 2) those who want to make a lower down payment.
Additionally, an FHA loan will help our clients with less-than-perfect-credit!

Streamlined Refinance

Refinance quickly without an appraisal.

Most FICO Accepted

More flexibility with FICO scores.

Quick Processing

Our FHA team is experienced to get your FHA loan funded quickly.

Gift Funds Allowed

Your friends and family can help finance your dream home.

203(K) Home Loan Renovation

Planning to buy a fixer-upper? This program combines your 1) construction loan and your 2) mortgage into a single home loan, which saves money in closing costs and simplifies the home renovation process.

Renovating? Save money!

Combine your renovation loan and your mortgage into a single home loan, which limits your loan closing costs.

Buying or Refinancing

The 203k loan is available to both buyers and refinancing households.

Backed By The Federal Housing Administration (FHA)

The 203k loan combines the traditional “home improvement” loan with a standard FHA mortgage, with loan amounts of up to $726,525.

Streamline Your 203(k)

The Streamlined 203k loan is for less extensive projects and costs are limited to $35,000. Traditional 203k loans do not have a construction loan size limit.

Veteran’s "VA" Loan

For the men and women that served us, we serve you by offering one of our best products.

You Earned This

For the men and women that served us, we serve you by offering our best product.

Fast Processing

Let our VA team guide you through a fast and easy process.

No Money Down

Purchase or refinance at 100% of the home’s value.

Turnkey Process

Receive your VA loan quickly and easily today.

Jumbo

A Jumbo Mortgage is designed to allow consumers who are purchasing bigger homes to take advantage of today’s low rates. If you are able to afford a more expensive home, but 1) haven’t saved up enough money to bring the loan down to conforming limits, or 2) you’ve found the perfect home, but it happens to be in a higher priced neighborhood, this mortgage program is made for you!

Eliminates Having To Obtain Multiple Loans

Provides the convenience of one loan for the entire loan amount, with a variety of options.

Purchasing A High-End Home

Jumbo Mortgages range from $417,000 to $2 million.

Tax-Deductible Interest

Jumbo Mortgage rates have reached historic lows, and interest on loans up to $1 million is tax-deductible.

REFINANCING

You have a fixed-rate mortgage with a high interest rate, and are looking to get a lower interest rate.
You have two mortgages and would like to consolidate them into one.
You have a long-term loan and would like a shorter-term loan so you can pay it off and build equity more quickly.
You have a short-term loan and would like a longer-term loan so as to reduce your monthly payments.
You want to move from an interest-only mortgage to a loan that pays down the principal.
You want some extra cash to make a purchase or to pay off other debt.

Four Common Refinancing Options That Can Meet Your Needs:

2- Lower Fixed-Rate Loan

If you currently have a high fixed-rate mortgage and the rates have dropped due to market conditions, then you may want to refinance to a low fixed-rate loan. Also, if you have an Adjustable Rate Mortgage (ARM), you might consider this option in order to get the security of a fixed rate. Even if your adjustable rate is low now, it is not guaranteed to remain that way, but if you get a low fixed-rate loan, then you lock that low rate in for the life of the loan. This option is a good choice if you are not planning on moving within the next five years.

3- Shorter-Term Loan

If your main goal is to quickly build up equity and to pay off your mortgage sooner, then the shorter-term loan is probably your best choice. A lot of times, if you refinance to this type of loan, your monthly payments will be higher, but you will pay substantially less interest and your mortgage will be paid off sooner. Also, you would benefit from a larger tax deduction on interest if you move from a 30-year fixed to a 15-year fixed loan. There are some cases, however, in which you may be able to refinance to a shorter-term loan without raising your monthly payment - if you’ve had your current mortgage for enough years.

4- Longer-Term Loan

If your current monthly payments are higher than is comfortable for your financial situation, then you might want to consider refinancing to a longer-term loan. This will result in a decrease in your monthly payments, since you will have more time to repay the loan. Examining your current mortgage and knowing how you would like to improve it are the first steps you need to take when starting the refinancing process. Once you know this, you can choose the option that will best help you achieve your goals.

Understanding Your Credit

What Does Your Credit Report Say About You ?

Shockingly, many people have never seen their Credit Report! Not knowing what your credit report says about your finances may cost you more when trying to obtain a mortgage. Even those who pay everything on time may have an unaddressed credit issue that is hurting their credit! It is very common for incorrect information to be reported on your Credit Report and it is important to identify any issues and correct them before you apply for a mortgage.
Many of you have seen “Free Services” advertised on T.V., The Internet, and through the Radio. When you see an offer for a “Free Credit Report”, IT’S NOT FREE and generally gives you a little information to get you to sign up for their services! However, under federal law, you have the right to obtain a free and secure Credit Report at www.annualcreditreport.com.

The top three credit reporting agencies, 1) Equifax, 2) Experian, and 3) TransUnion are required by law to provide you with a free annual credit report, once a year.

Buying Down Your Interest Rate

If you want an even lower mortgage rate, it may be possible to buy it down by paying mortgage discount points. But be sure it makes sense.
Some existing and prospective homeowners out there are fixated on obtaining the lowest possible mortgage interest rate, even if it means pulling money out of their own pocket at the time of financing. Though most borrowers usually opt for a higher mortgage rate to avoid paying closing costs when buying a home or refinancing a mortgage, this group of savvy homeowners will pay the one-time fees in exchange for a lower interest rate to save money over the long term. Of course, this strategy only really makes sense if you plan to stay with the mortgage for a decent chunk of time, as associated savings aren’t usually realized for several years.

Buying Down Your Mortgage Rate

When you apply for a home loan you will be given the opportunity to buy down your rate this requires paying mortgage discount points. Which are a form of prepaid interest. If you’re working with a bank or mortgage broker, you can easily buy down your interest rate by asking for a series of different rates and associated costs. This is known as “buying down the rate,” and is a common practice in the mortgage industry. In short, if you pay mortgage discount points at closing, aside from any commissions and any other lender fees, you can bring your interest rate down to a lower level. And then save money each month via a lower mortgage payment.
For example, if the bank or broker says you qualify for a 30-year fixed at 4.25% with no points, but you want a rate of say 3.875%, you can ask what it would take to get the desired rate. Let's say the cost to buy the rate down to 3.875 is one mortgage point. At which point you’ll need to decide if the monthly savings support the upfront cost. Points are a percentage of the loan amount. In this example let’s say you are financing $200,000. The cost of 1 point sets you back $2,000 at closing. You’ll need to know how long it will take to recoup the cost, compared to the monthly savings and if you will still have your mortgage at that time.

Should you buy down your rate ?

This is a very important question you should know the answer to based on the cost to buy down the rate and how long you plan to keep the loan. You may have seen mortgage advertisements for “no point mortgages” or “zero point mortgages,” and might be quick to jump on them. And though these no cost loans could serve you well to leverage your money, for borrowers who have decent asset reserves and plan to pay off their loans, buying down the interest rate may be a better idea. Deciding whether or not to buy down your interest rate can be tricky, but definitely worth exploring. Most mortgage programs have the option where you’ll pay a certain amount in “fee” for a specified interest rate.

Mortgage Points and Mortgage Buydowns Explained

There isn’t one specific ratio And it can vary by bank/lender so you really need to find the sweet spot where the rate buydown is justified by the cost vs the monthly savings. Usually as the interest rate goes lower, the price to buy down goes higher, often disproportionately. This actually makes sense because it gets increasingly expensive to go well below typical market rates. As you can see, someone could pay one point for a rate of 3.875%, but be asked to pay nearly double that to get the rate down another eighth of a percent to 3.75%. That probably wouldn’t make much sense. The same is true when moving below key levels like from 4% to 3.875%. Lenders probably know you want that lower rate because it just looks and feels so much lower. So watch out for a big bump in price.

Don’t chase a certain rate like 3.99% or some other emotional number. Run the numbers and do the math with a calculator to see what exact buydown (if any) makes the most sense. This is why it’s important to decide on a pricing threshold where it makes sense to buy it down instead of chasing a certain rate. It’s foolish to go after an exact rate, especially when the cost associated may eclipse the actual savings you’d accrue over time with the slightly lower rate. Even if you have your heart set on a rate, you’ll want to compare your mortgage payment at different rates and consider the associated costs for buying down to those rates.

Note: There may be a limit to how many mortgage points you can buy based on the new lending regulations, along with how low the lender is willing to go. It also gets to a point where it no longer makes sense to keep going lower because the cost becomes excessive.

A rate sheet may look something like this:

Each rate has a corresponding price, which is simply displayed as a percentage of the

loan amount. In the example above, the par rate would be 4.25%, as it has an associated price of zero.

Mortgage Broker Or Bank

Mortgage brokers are licensed residential mortgage professionals with access to hundreds of loan options for consumers looking to buy or refinance a home. They support borrowers by leveraging relationships and securing the most favorable loan options available. Brokers can help homeowners save thousands of dollars on what is likely the most important financial undertaking of their lives. Brokers streamline the loan shopping process by promptly lining up multiple options that borrowers qualify for to allow borrowers to choose the best option for themselves. While larger lending institutions serve customers, they are not focused specifically on residential mortgage lending. They focus on auto, boat and personal loans, just to name a few. They are not focused on 1 area of expertise: mortgages. Large retail lending institutions can only offer the loan products they have in house, and most often pricing is higher because of the overhead associated with larger institutions and banks. Brokers, including local banks and credit unions, are typically smaller and more nimble; they adapt to change quickly and have less overhead to be more competitive in the mortgage market. Furthermore, the commission structure for a broker is highly regulated and broker originators have the same pay structure on all loans, no matter what type of loan or loan size. Further, they are able to get loans closed at a faster rate than large lending institutions. Brokers partner with high-quality lending partners nationwide to ensure their referral and new business opportunities continue to flourish by utilizing the tools, products and overall support that lenders offer to their broker network. Additionally, many consumers wrongly assume that large retail lending institutions and banks offer the best mortgage deals. In fact, brokers are not beholden to a retail bank’s overhead costs and can often secure a lower interest rate through the same large lending institution’s wholesale division. Consumers who apply for a loan directly with a large retail lending institution or bank believe they are cutting out the middleman, but in fact, may be putting themselves at a disadvantage by not using a broker.

A known shortfall of working directly with a bank is that its loan officers are not necessarily mortgage experts. In fact, federally insured lending institutions do not require their loan officers to be licensed. While they must be registered with the Nationwide Mortgage Licensing System database and hold an NMLS number, loan officers are not held to the same standards and regulations in terms of extensive testing and ongoing training on mortgage guidelines and changes that brokers are required to adhere to.
On the other hand, brokers must undergo continuous training, submit to background checks and pass rigorous exams to hold their professional certifications.
Imagine for a moment that you are a professional tennis player and injure your knee. Your career depends on the right treatment, and your future ability to compete and earn money rides on the medical advice you get. Whom would you listen to? An orthopedic specialist who has dedicated his or her career to the study of knee mobility and performed hundreds of specialized surgeries, or a doctor who lacks a specialization but does a variety of procedures on everything including head, shoulders, knees and toes?
With their financial health at stake, consumers want and need an expert to guide them through the mortgage-shopping process. My suggestion is a licensed mortgage broker.

Competitive rates, great products and great service are “tickets to the game,” regardless of whether you use a bank or a mortgage broker

Shopping idly for a home may be pleasant, but serious homebuyers need to start the process in a lender’s office, not at an open house. As a potential buyer you benefit in several ways by consulting with a lender and obtaining a pre-approval letter.
First, you have an opportunity to discuss loan options and budgeting with the lender. Second, the lender will check your credit and alert you to any problems. Third, you will learn the maximum amount you can borrow, which will give you an idea of your price range. However, you should be careful to estimate your comfort level with a given house payment rather than immediately aiming for the top of your spending limit. Lastly, most home sellers expect buyers to have a pre-approval letter and will be more willing to negotiate with you if you have proof that you can obtain financing.

Mortgage Glossary of Terms

The home-buying process is complicated, to say the least. There a plenty of steps between pre-approval and closing and you’ll want to understand all the mortgage terms sure to be thrown your way in between. That’s why we’ve put together this handy mortgage glossary. Feel free to refer to it every time the realtor-broker- appraiser-speak starts sounding like straight-up gibberish.

Appraisal

An opinion of a home’s value as of a given date of a property prepared by an expert. The experts are usually licensed in the state.

Appreciation

The increase in a property’s value over time.

AARM (Adjustable-Rate Mortgage)

A mortgage in which rate changes according to a formula specified in the loan document.

Automated Underwriting

A computerized system that preliminarily determines a borrower’s loan eligibility based on a predetermined set of financial criteria.

Buyer’s Agent (also the Selling Agent)

This real estate agent who works on behalf of a buyer by researching homes and neighborhoods and drawing up offers and contracts. Ask your agent to draw up a Buyer’s Broker Representation Agreement.

Cash Flow

In a rental property owned by an investor, this refers to the amount of money a property generates after expenses are accounted for.

Casualty Insurance (also Homeowners insurance, Fire insurance or Hazard insurance):

A policy which protects the homeowner against damages to their property caused by fire and other common hazards. Liability insurance, which protects homeowners in case someone is injured on their property, is also included. Most policies are “full replacement cost,” which guarantees sufficient funds to rebuild the home. Full replacement cost is usually determined based on a home’s last appraised value less the cost of the land. In order to protect lenders’ interests, they are typically named on casualty insurance plans as additional insured parties.

Certified Public Accountant (CPA):

A CPA is an accountant who has passed a state examination and other requirements necessary to be a practicing professional. There are excellent tax preparers who are not CPAs.

Closing Costs:

The miscellaneous costs associated with closing. These typically include a Loan Origination Fee and Discount Points, Appraisal Fee, other Lender Fees, Escrow and Title Fees, and the first year’s Insurance Premium.

Com-parables:

Properties that are similarly sized and have similar features to a subject property. By reviewing comparable properties, buyers and their agents can get an idea of a property’s market value.

Comparative Market Analyses:

Conducted by a real estate agent, this assessment of a property’s value is used to determine a reasonable offering price.

Condominium

In general, a higher density type of development in which a resident owns one of many units along with a share of the ground and other common amenities, like a swimming pool. The units are generally attached (unlike traditional single-family detached homes).

Condo Association:

A condo association is a governing body that consists of individual condominium unit owners and that makes decisions regarding the maintenance of a condominium building and its grounds.

Counter-offer:

In a real estate negotiation, a counter-offer is typically a response by the seller to the buyer’s initial offer. It is usually lower than the initial listing price and higher than the buyer’s offer.

Credit Bureaus:

Private companies that collect and maintain individuals’ credit histories, which they provide to creditors for a fee. The three major credit bureaus are Equifax, Experian and TransUnion.

Credit Report:

Produced by credit reporting agencies, this reveals the borrower’s history and current status of obligations. You’re entitled to one free credit report from each bureau every 12 months. You can request these reports at AnnualCreditReport.com.

Dual Agency:

When a buyer’s agent concurrently represents the interests of a seller. Dual agency is generally not recommended

Deed:

In many states, the word mortgage is used but the security instrument whereby the property is given as security for the loan is actually a Deed of Trust. There are three parties to the instrument: the Trustor, the borrower, the Trustee, and the Beneficiary, the lender. The borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. In the event of default, the beneficiary notifies the Trustee of the default whereupon the trustee proceeds to sell the property at a public sale. This is really a “paper function” as the Trustee will actually play no role. In most states a lender seeks a non-judicial foreclosure where the proceeds of the sale less the costs are the lender’s revenue to apply against the loan. If the proceeds from the sale are not sufficient to pay off the loan, the lender may not pursue other legal action to collect the deficiency. In some states, but not all, a lender must seek a judicial foreclosure to recover the full amount owed.

Earnest Money

The deposit money given by the buyer to his agent or settlement agent upon the signing of the Offer to Purchase (alternately known in some regions as the Deposit Receipt). This shows that the buyer is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If a contract to purchase is not agreed upon, it is returned to the buyer. If a contract is agreed upon but the sale is not consummated, disposition of the earnest money, either forfeited to the seller or returned to the buyer is dependent upon what is agreed to in the Purchase Contract.

Escrow Officer:

After an offer is made, an escrow officer (or a representative of an attorney’s office) facilitates the transaction from the time the contract is signed through the close of escrow. These include inspections, earnest money agreements, disclosures, lender issues, and title and escrow issues. This is different from an escrow coordinator attached to a real estate broker’s office — a person whose services you should not pay for.

Escrow:

In California and some other states, the settlement agent who handles the closing of a purchase transaction is an Escrow Company. In other states, settlement agents may be the escrow division of a title company or an attorney.

Escrow accounts (also Impound Accounts):

Lender-established accounts through which a borrower makes payments and a lender takes deductions to cover the costs of the following: mortgage insurance premiums, property tax payments, and/or casualty insurance premiums. Escrow accounts are customary in the East, especially where the LTV of an original loan exceeds 80%. In these situations, borrow equity is not high and if foreclosure became necessary, the lender would not want to recoup the cost of back taxes payment.

Federal Reserve (also “The Fed”):

The central bank of the United States government. The Federal Reserve is responsible for setting short-term interest rates that serve as models for many types of loans. Mortgage rates, however, are influenced by the market rates on long-term securities like the 10-year Treasury Bond, which is only loosely affected by the Fed.

FICO:

Created by the Fair Isaac and Co., this mathematical scoring system is the major credit scoring model used to assess the relative risk of an individual borrower.

Lock Period:

Either 15, 30, 45, or 60 days, lock periods are set amounts of time during which the interest rates buyers have been promised cannot be made any higher.

Fixed-Rate Loan:

A loan in which the interest rate doesn’t fluctuate but rather remains consistent for the life of the loan.

Lot Number:

The number corresponding to a parcel of land meant to be owned by a particular individual.

Loan-to-Value (LTV):

A ratio that expresses the amount of a first mortgage lien as a percentage of a property’s total appraised value. For example, if a borrower wants $100,000 to buy a home worth $120,000, the LTV ratio is $100,000/$120,000 or 83%.

Mortgage:

A lien or claim against real property given by the buyer to the lender as security for money borrowed.

Multiple Listing Service (MLS):

A group of private databases that provides real estate brokers with a comprehensive look at available housing in a particular market or across markets. The information, which used to be guarded, is now available at numerous websites.

Mortgage Loan Officer:

A representative of a lending institution who acts as an intermediary between the institution and the borrower.

Negative Amortization:

A method of loan repayment in which the borrower does not pay back the full amount of interest owed each month. The portion of interest that remains unpaid is added to the total amount owed to the lender.

Pre-approval:

A commitment from a lender stipulating how much money a person may borrow and under what terms and conditions.

Points:

A point is 1% of the amount of the loan. On a $50,000, one point is $500 while on a $200,000 loan, one point is $2,000. When a borrower pays points, this first includes the Loan Origination Fee. Additional points are called “discount points” and are an off-set against interest rate. Lenders will, these days, almost always offer a number of “rate versus fee” combinations allowing the borrower to choose one which is most suitable for his circumstance.

Piggyback Transaction:

Typically utilized by borrowers who wish to avoid paying private mortgage insurance(generally a requirement when a person makes a down payment of less than 20%), piggyback transactions or 80-10-10 mortgages as they are alternately called, are transactions by which two separate mortgages are originated at once. The first position lien has an 80% loan-to-value ratio and the second position lien has a 10% loan-to-value ratio. The remaining 10% is accounted for in the form of a down payment.

Preliminary Title Report:

Once escrow is opened, a preliminary title report is issued. This report provides buyers with information on a property’s title and whether there are any easements, liens and encumbrances on a particular property.

Pre-qualification:

An informal, but not binding assessment of how much money a person could potentially borrow from a lender. Pre-qualification is an opinion rather than a promise, and is thus different from pre-approval.

Private Mortgage Insurance:

A form of insurance that lenders generally require when borrowers make down payments that are less than 20%; in other words, when their loan-to-value (LTV) percentage is greater than 80%.

Property Insurance (Fire Insurance):

Insurance policy intended to cover risks including fire, theft and some weather damage. Also called Fire Insurance or Casualty Insurance.

Prorate:

This refers to an adjustment made on a payment to account for unused service so that buyer and seller each pay their respective share of costs in proportion to the time in which they own the property.

Real Estate Agent:

A state-licensed professional who negotiates the sale of real estate, typically on behalf of its owner. A buyer’s agent represents the buyer in a real estate transaction

Real-Estate Owned (REO):

A term referring to properties owned by banks as the result of a foreclosure.

Reserve Account:

Reserves set aside by a condo association to cover anticipated maintenance and other expenses.

Reserves:

This refers to the amount of liquid assets that a borrower has after paying the down payment and closing costs.

Risk:

In terms of credit, risk refers to the likelihood of a borrower being able to make payments in a timely fashion and, ultimately, to pay off a loan. Naturally, lenders prefer low-risk borrowers to those who pose a high risk. Lenders determine risk by reviewing a person’s credit score and credit history.

Risk-Based Pricing:

The higher the perceived risk, the higher the interest rate the borrower will pay.

Single-Family Residence:

Unlike a condominium, in which certain areas are shared between individual homeowners, a SFR is a private unit intended for occupancy by a single family.

Subprime:

Refers to loans offered to high-risk individuals (with low down payments and/or bad credit scores) and thus carry the highest interest rates.

Termite Report:

A report issued by a licensed state inspector that reports termite infestation and dry rot and any damage that resulted. The report will list corrective action and the cost of repairing damage to a home.

Tract Number:

Refers to a subdivision of land as it is identified by the U.S. census. Tracts can range anywhere from 2,500 to 8,000 inhabitants.

Yield Curve:

A yield curve is the representation of the relationship between an interest rate and the time to maturity of a debt. The shape at any given time will determine the difference between long-term loans like a 30-year fixed-rate loan and, say, a 5/1 ARM.

Source: https://www.thetruthaboutmortgage.com/