…Selecting the mortgage that suits you best is like buying a pair of shoes; choose the one that fits the best. By becoming familiar with the many choices available you can find a package that meets your individual needs.
Some of your choices are:
CONVENTIONAL
Fixed rate mortgages, either 30 or 15 year amortizations, are most commonly used. typically, the buyer must have a minimum of 5% of their own money. Gift letters are usually acceptable for additional down payment monies. If possible, the buyer should have 20% down in order to avoid PMI (Private Mortgage Insurance). PMI involves additional up-front costs of about 1% and an additional fee on the monthly payment, typically 1/3% – 1/2%.
ADJUSTABLE
There are as many adjustable rate programs as there are lenders who offer them – and even more. The adjustable mortgage is useful for the buyer who needs a lower rate to qualify for a loan. Another reason to choose the ARM would be if the buyer is only going to own the home for a short time. Buyers should ask about margins, annual caps, and life of the loan caps.
FHA
The Federal Housing Authority provides exceptional opportunities. The buyer with little cash to invest will find excellent opportunities. It is one of the very few programs that will allow you to borrow your entire down payment. Mortgage insurance and closing costs can be rolled into the mortgage. The 203K plan works like a construction loan, allowing the buyer to purchase a rehab candidate and borrow the rehab funds.
VA
For the man or woman who qualifies for the Federal Veteran Administration there are few opportunities as exceptional as their home loan programs. Down payment can be as low as $0.00. Expect to pay funding fees and origination. Seller may assist with closing costs and origination may be built into the mortgage. Rates are excellent. contrary to some opinions, the VA loan can be easier to get the buyer and home to qualify than with other loans. The VA is committed to helping the Veteran as much as possible.
CONSTRUCTION LOANS
If you want to build a home, you will be heading our for a construction loan. They can be made with a “bridge-type” loan and closed in one closing at the home completion or the lender may require 2 closings – one at the beginning and one at the end. You will likely pay double closing costs for the “two closing” program. The funds are released as the project progresses. The buyer only pays interest on the used portion. typically, the rate at the final closing is the rate that the loan is closed at. Seldom does the final rate reflect the beginning rate.
