What Type of Loan Do I Need: Commercial, Construction or Home Loan

Before deciding on the type of loan needed, let us look at the different types of loans available:

FHA Loans

The Federal Housing Administration (FHA), which is part of the U.S. Dept. of Housing and Urban Development (HUD), administers various mortgage loan programs. FHA loans have lower down payment requirements and are easier to qualify than conventional loans. FHA loans cannot exceed the statutory limit. As you can see there are a few rules to know when seeking your home loan. Call today to get more information.

VA Loans

VA loans are guaranteed by U.S. Dept. of Veterans Affairs. The guaranty allows veterans and service persons to obtain home loans with favorable loan terms, usually without a down payment. In addition, it is easier to qualify for a VA loan than a conventional loan. Lenders generally limit the maximum VA loan to $203,000. The U.S. Department of Veterans Affairs does not make loans, it guarantees loans made by lenders. VA determines your eligibility and, if you are qualified, VA will issue you a certificate of eligibility to be used in applying for a VA loan.

RHS Loan

Not your typical loan, Home loans and Rural loans differ based on the program you choose. The Rural Housing Service (RHS) of the U.S. Dept. of Agriculture guarantees loans for rural residents with minimal closing costs and no down payment. RHS Loans are geared to farmers and Rural areas.

Conforming Loans

Conventional home loans may be conforming and non-conforming. Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. Home owners may be confused as to which type of home loan they need. Conforming loans have the following: These two stockholder-owned corporations purchase mortgage loans complying with the guidelines from mortgage lending institutions, packages the mortgages into securities and sell the securities to investors.

By doing so, Fannie Mae and Freddie Mac, like Ginnie Mae, provide a continuous flow of affordable funds for home financing that results in the availability of mortgage credit for Americans. If a home loan homeowner can apply and get acceptable for this type of loan they have found themselves in a great spot.

Jumbo Loans

Does your Home Loan look like a Jumbo Loan? Well if your Loan is above the maximum loan amount established by Fannie Mae and Freddie Mac then you are in ‘jumbo’ loans. Because jumbo loans are bought and sold on a much smaller scale, they often have a little higher interest rate than conforming, but the spread between the two varies with the economy.

B/C Loans

In times of financial tightness home loan seekers find a variable or adjustable loan easier to obtain and pay off. An Adjustable rate Mortgage is a home loan whose interest rate, and accordingly monthly payments, fluctuate over the period of the loan. With this type of Home Loan mortgage, periodic adjustments based on changes in a defined index are made to the interest rate. The index for your particular loan is established at the time of application.

Fixed Rate Mortgages

Home Loan owners that choose a Fixed Rate Mortgage have steady interest rates through out the term of the loan.With fixed rate mortgage (FRM) loan the interest rate and your mortgage monthly payments remain fixed for the period of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15 years and 10 years. Generally, the shorter the term of a loan, the lower the interest rate you could get.

Most home owner tend to get a Fixed Rate Mortgage with terms are 30 and 15 years. With the traditional 30-year fixed rate mortgage your monthly payments are lower than they would be on a shorter term loan. But if you can afford higher monthly payments a 15-year fixed-rate mortgage allows you to repay your loan twice as faster and save more than half the total interest costs of a 30-year loan.

Adjustable Rate Mortgages

In times of financial tightness home loan seekers find a variable or adjustable loan easier to obtain and pay off. An Adjustable rate Mortgage is a home loan whose interest rate, and accordingly monthly payments, fluctuate over the period of the loan. With this type of Home Loan mortgage, periodic adjustments based on changes in a defined index are made to the interest rate. The index for your particular loan is established at the time of application.

Negatively Amortizing Loans

When choosing a home loan, consider a negative amortization, also known as NegAm, occurs whenever the loan payment for any periodic is less than the interest charged over that period so that the outstanding balance of the loan increases. Negative amortization only occurs in loans in which the periodic payment does not cover the amount of interest due for that loan period. The unpaid accrued interest is then capitalized monthly into the outstanding principal balance. The result of this is that the loan balance (or principal) increases by the amount of the unpaid interest on a monthly basis.

NegAM home loans today are mostly straight Adjustable Rate Mortgages (ARMs), meaning that they are fixed for a certain period and adjust every time that period has elapsed; e.g., one month fixed, adjusting every month.

Option Arm Loans

Contact us to find out more about Option Arm Loans.

Fixed Period ARMs

Are you thinking about getting a Fixed Rate Home Loan.If you are getting yourself a home mortgage loan, you will most likely encounter a phase where you are torn between choosing a fixed rate or an adjustable type of mortgage. To Pay Points Or Not To Pay Points? I get this question a lot. Why would you and why wouldn’t you….Let’s look at the options. What is a point? 1% or your loan amount. If you borrow $200,000, then 1 Point = $2,000. This would be $2,000 in addition to what you would normally spend on your normal closing costs if you are obtaining a conforming fixed rate loan. Most of the time on a normal, conforming Fixed Rate Loan you don’t have to pay points unless you have a smaller loan, or because you want to “purchase” a lower interest rate on the loan for the life of the loan. When considering sources of finance, home equity loans and home equity lines of credit stand out as the cheapest and more flexible financial options. However, you may wonder what the differences between home equity loans and home equity lines of credit are.

If you are looking to buy a house, avail of a home mortgage. As with any other loan type, you will have to pay an interest. The most important factor to consider when securing a home loan is the cost of the loan. If you want to get a good rate on your home mortgage, you will need to look into the many factors that can raise or reduce your costs

Jumbo loans are non-conforming, fixed rate loans for purchases and refinances that require larger loan amounts than Fannie Mae and Freddie Mac will allow. Currently, Fannie and Freddie’s “conforming” loan limit is $417,000.

Two Step Mortgage

Contact us to find out more about Two Step Mortgages.

Convertible ARM Loans

Contact us to find out more about Convertible ARM Loans.

Graduated Payment Mortgages

Contact us to find out more about Graduated Payment Mortgages.

Buydown Mortgage

For Home Loan Seekers, a mortgage buydown is more advantageous than choosing, say, an adjustable loan with a payment option that allows for negative amortization like an Option ARM. That’s because with mortgage buydown programs, your mortgage payment always includes principal and interest. This means every time you make a payment, your mortgage balance grows smaller instead of bigger.

Basics of Today’s Popular Mortgage Buydowns

Popular mortgage buydowns work like this:
– Payments are reduced and figured on a lower interest rate over a specific term.
– The difference between the “real” note rate and the lowered interest rate is paid in cash by the seller or the buyer.
– Think of it like a subsidy. It’s like socking away $1200 in the bank and withdrawing $100 every month for 12 months to help make your mortgage payment.

Construction Loans

The construction loan is given by a lender to be used for construction, remodeling, materials and labor. The construction loans are paid by a residential mortgage at the end of the construction project. The lender will open what is called “Construction Line”, which will be used for home construction project, to pay for material, labor and supplies. The lenders will pay for each stage of the construction work and the materials, submitted by subcontractors after verifying that the work was actually done, and materials Lenders nominate a special fixed draw schedule incorporated in to each stage of the construction. There may be a penalty for any additional draws requested, that are exceeding the allowed amount. The downside of the construction line is that it has a higher interest rate then regular home loan mortgage.

Residential Mortgage In order to pay for your construction loan you will need to get approved for a residential loan. The residential mortgage is like conventional and non-conventional home loans. Fixed and adjustable rate may be applied. Construction/Perm Loans Some lenders offer both the construction line and residential mortgage as one loan. The Construction/Perm loan is a combined loan made directly by the lender to the borrower. It functions as a construction line for financing the construction of the home, and then it serves as a permanent mortgage by paying off the construction line after you complete the construction project. The benefits of the construction/perm loan are: -Since this is a combined loan, you minimize your closing cost, attorneys and appraisal fee. -Since the approval for construction line depends on the approval of residential loan, you only need to submit documentation to one lender, and deal with one loan only. -The construction loan is tax deductible.

The check list for Home Construction Financing. Start-up Construction Budget A start-up construction budget is a cash budget prior to obtaining your construction financing. Depending on the size of your construction, it is commonly suggested anywhere between $5k and $10k.

Down Payment Down payment is usually 20 percent or more, if required. The down payment includes either equity in an existing home, the cost of land or cash. Make sure to get a true market value for your home.

Planned Budget Focus on staying within your budget, since it is really easy to get carried away when it comes to home remodeling. Documentation Make sure to have all of the required documents verifying your income, employment, savings and investment accounts. The lender will require an estimate costs and the construction project plan.

Balloon Loans

Do you need a home loan that incorporates a Balloon Loan? Balloon loans are short-term fixed rate loans that have fixed monthly payments based usually upon a 30-year fully amortizing schedule and a lump sum payment at the end of its term. Usually they have terms of 3, 5, and 7 years.

Home Owners Advantages for using a Balloon Loan:

The advantage of this type of loan is that the interest rate on balloon loans is generally lower than 30- and 15- year mortgages resulting in lower monthly payments. The disadvantage is that at the end of the term you will have to come up with a lump sum to pay off your lender, either through a refinance or from your own savings.