Mortgage Information

TYPES OF MORTGAGES

Conventional Home Loans

The most common form of mortgage is a conventional mortgage, also known as a conforming loan. This type of home loan involves two parties: the borrower (you) and the lender. Most lenders require at least a 20% down payment on a conventional mortgage, e.g. if the home costs $300,000, the lender requires at least a $60,000 down payment and loans out the remaining $240,000. The good news is that an increasing number of lenders are offering first home buyers programs with down payments of as little as 3 percent.

Jumbo Loans

Jumbo loans are loans that exceed the legal conforming loan limits set by the Federal Housing Finance Agency (FHFA). Because jumbo loans involve more money and therefore greater risk to mortgage companies, they typically have stricter qualifying requirements. In 2022, the conforming loan limit is $647,200 in most U.S. counties and as much as $970,800 in high-cost areas such as the greater New York, Washington, D.C., San Francisco, and Los Angeles areas.

FHA Loans

This is a low income home buyer program backed by the government and offered by private lenders. FHA loans come in two forms: 3.5% down payment for borrowers with credit of 580-619, or 10% down payment for borrowers with 500-579 credit. The catch with an FHA loan is that it requires monthly private mortgage insurance (PMI), which you can usually stop paying once you reach 20% equity.

VA Loans

VA loans are government-backed loans offered by mortgage lenders to service people and veterans. VA loans don’t require any down payment, making this a suitable first home buyers program for eligible borrowers. The following people may apply for a VA loan: veterans who have served at least 90 consecutive days of active service in wartime or 181 days of active service in peacetime; members of the National Guard and Reserve who have served at least 6 years; and spouses of veterans who died in the line of duty or as a consequence of a service-related injury.

USDA Loans

Like other government-backed loans, lenders may only offer USDA loans to borrowers who meet the qualifying requirements–namely, purchasing in a rural or semi-rural area. USDA mortgages offer 100% funding but do require monthly PMI until you reach 20% equity.

Five top reasons to consider owning your own home.

-Article from GUILD MORTGAGE

No more landlords: This may be a highly influential factor depending on a potential buyer’s experiences. Many renters have poured a ton of money into a home that they’re living in to keep it at the standard of living they enjoy, only to find that their landlord is soon planning to sell the home. Their hard-earned cash and money invested into their rented home will then only benefit the seller.
Making a home your style: This is much more difficult to do in a rental. Yes, as I just mentioned, you can make some modifications, but many things that can be done to a home you own can’t be done to one you’re renting. Taking into consideration Homeowner’s Associations or planned community development restrictions, owning still provides more control and flexibility over renting.
Weighing the costs of homeownership: Of course, with homeownership you won’t be calling the landlord to come fix your toilet or dishwasher. So, having a financial reserve is important to carry you through the months when you run into unexpected troubles. Websites such as GinnieMae.gov offer price charts that help you compare how much you’ll save by buying or renting. It’s a helpful tool that allows you to analyze factors such as how much tax savings you’re likely to receive, how much possibly equity you’ll gain, and how much you’re rent may increase.
Long-term plans tilt the scale toward owning: In a recent Tampa Bay article, Walter Molony of the National Association of Realtors said, “For people with long-term plans, the rent vs. buy equation is tilting heavily toward buying because housing affordability is at record highs dating back to 1970,” he explains. “Homes are undervalued in many areas—selling for less than the cost of replacement construction—and rents are rising at a faster pace. Many people are considering ownership now as a hedge against inflation.”

First Time Home Buyer

Loans and Programs

For many first-time home buyers, the primary barrier to buying a home is not having the money for a down payment. Low down payment loans are one solution, because they allow first-time buyers to get into a home with just a 3% down payment, instead of the standard 20%. In this section, we outline other first home buyers loan and program options.

According to the Department of Housing and Urban Development, the following qualify as first-time home buyers:

A person who has not owned their principal residence for at least 3 years;
A single parent who previously co-owned a home while married;
A homemaker who previously owned with a spouse, but no longer receives financial support from that spouse; or
A person who has only owned a residence not affixed to a permanent foundation, such as a mobile or trailer home.

Down payment assistance

Depending on where you live, assistance for housing may be available from state or local government agencies, private entities, or nonprofits. One form of down payment assistance available to first-time borrowers across the country (except New York) is the Chenoa Fund. This program is administered by CBC Mortgage Agency, a federally chartered government agency. Provided you meet certain eligibility requirements, the Chenoa Fund may offer up to 3.5% down payment assistance.

What to Look for When Comparing Mortgages

APR

The monthly payments on a mortgage comprise principal, as in the amount remaining on your loan, and interest, as in the money the lender collects for providing the loan. Your APR, or annual percentage rate, consists of the interest rate plus certain other lender fees. The lower the interest rate / APR, the lower your monthly payments to the lender.

Terms

The repayment term, or loan duration, is another important factor when comparing mortgages. The typical repayment term is 15-30 years although some lenders offer mortgages with terms as short as eight years. There is no right or wrong when it comes to repayment terms; what’s best for you depends largely on how much you can afford to pay each month. The shorter the term, the higher your monthly payments but the less you’ll pay in interest over the life of the loan. The longer the term, the lower your monthly payments but the more you’ll pay your lender in the long run.

Closing costs

Closing costs are the fees and charges owed to the lender when the loan begins and usually range from 2-6% of the loan value. Therefore, if you take out a $300,000 loan and your closing costs are 3%, this means you’ll pay the lender $9,000 in upfront fees. Closing costs may include origination fees, property appraisal, title fees, taxes, and various other costs–some of which go directly to the lender and some which the lender collects on behalf of third parties. Closing costs vary from lender to lender, so knowing each lender’s approximate closing costs can assist you in doing a proper comparison.

Ease of application

Gone are the days when you had to walk into a physical branch to apply for a mortgage. These days, many mortgage lenders let you apply online, sometimes through a fully automated online mortgage platform and other times with phone assistance from a loan agent. If convenience is important to you, then keep an eye out for digital-friendly lenders.

HUD home buying programs

HUD homes are foreclosed homes offered for sale by Fannie Mae, one of the two government-sponsored enterprises that guarantee qualified mortgage loans via the secondary market.