Mortgage Products & Loans

Find The Mortgage Product That Fits Your Life

When applying for your pre-approval your mortgage professional can help you determine the most appropriate product based on the goals you've shared. Ask these questions:

• Should I choose a fixed or adjustable rate?
• How long do I plan on living in this home?
• Once I move, will I sell the home or keep it as an investment?

Remember, mortgages are financial tools, not bragging rights. If you focus on the rate alone, you may not put yourself on the best financial track to meet your own objectives, so be honest with yourself when answering these questions.

Fixed Rate vs. Adjustable Rate Mortgage: Which Should You Choose?

Understanding the basic mechanics of fixed and adjustable rate mortgages (ARM) is key when trying to make a decision about which product will work best for you. Let's briefly review the difference between the two—then you'll be ready to make your decisions.

Fixed Rate Mortgages

Fixed rate mortgages are the most stable of the options — the rate is fixed for the term of the loan. There are many options regarding the length of fixed-rate-mortage, such as 10, 15, 20, 25 or 30 years (the most common being 15 and 30 years). For example, a 10 year fixed rate loan is amortized over 10 years or 120 months. The loan will be paid in full by the end of the term of the loan.

If you are considering a shorter term simply because of a lower rate, remember, you can always make an additional payment throughout the year which can reduce your mortgage term by 5 to 7 years.

Adjustable Rate Mortage (ARM)

When used properly, good financial tools. Before deciding on an ARM product it's prudent you understand how ARM rates move.

Adjustable rate mortgages have interest rates and monthly payments that change based on the index the rate is tied to (LIBOR being the most common). Many ARMs will have a fixed rate during the initial fixed period, then begin to adjust once that period expires.

Once your fixed period expires, your rate will begin to adjust; in an effort to keep the rate from climbing too high, the lender offers rate adjustment caps.

• Initial Cap – This cap prevents the rate from adjusting more than the stated percentage for the first year.
• Periodic Cap – This cap prevents the rate from adjusting more than the stated percentage during each adjustment period.
• Lifetime Cap – This cap prevents the rate from adjusting more than the stated percentage for the life of the loan.

If you've chosen an adjustable rate mortgage you'll need to speak with your mortgage professional about the most appropriate ARM for your financial goals.

How long do I plan on living in this home?

If you are purchasing a starter home, the average amount of time you might expect to spend there is 5-7 years; however, if you're unsure, keep in mind that 5–7 years can fly by, and you might not be ready to move at that time. In that case, a fixed rate might be the best option since it offers flexibility of options. For example, if after seven years you would like to remain in the home you will not incur the cost of a refinance (out of your adjustable rate loan) or be subject to possibly higher rates.

Once I move, will I sell the home or keep it as an investment?

You should consider whether you'll want to keep the home when you're ready to move or not. Fixed rates will allow you to keep the same payment until you are ready to sell, if ever. When considering your options you should always speak with your mortgage professional for all of the details related to available mortgage products.

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Mortgage Loan Programs

There are many types of mortgage loan programs available, and it can become overwhelming when trying to decide which program will meet your financial needs. Before determining which loan program is right for you, you'll need to ask yourself:

• Will I need a jumbo or conforming loan?
• How much can I put down?
• Will I qualify for other loan programs?

Be realistic when answering these questions; these are your financial goals and your answers will help point you the direction of the type of program you'll need.

Will I need a jumbo or conforming loan?

Answering this question will be easy if you are clear on the difference between a conforming and jumbo loan.

• Conforming Loans - Loans with a loan amount at or under the maximum loan amount set by Fannie Mae and Freddie Mac. Conforming loans are not FHA, USDA, VA, jumbo or construction loans.
• Jumbo Loans - Loans with a loan amount that exceed Fannie Mae and Freddie Mac's maximum loan amounts.

Learn more about the loan limits in your area. While this site offers Fannie Mae loan limits, both Fannie and Freddie rarely run independent of one another.

How much can I put down?

This is an important question and your answer will help narrow down your program eligibility. For example, if you will put down less than 5 percent then FHA will be your best option; however, if you have 5 percent or more, you can take advantage of the Fannie Mae and Freddie Mac loan options.

When determining how much savings you have for your down payment, don't forget to include closing cost calculations. You'll need to speak with your mortgage professional regarding an estimated itemized list of closing costs—this is also known as your Good Faith Estimate.

Will I qualify for other loan programs?

There are several loan programs you might qualify for and speaking with your mortgage professional about all of your options will yield the best results.

Let's briefly review some more popular loan programs available:

• FHA Loans - FHA loans are insured by the federal government. These types of mortgages offer flexible lending terms such as low down payment and reduced credit score requirements. While every FHA loan requires mortgage insurance, regardless of your down payment amount, it's still a great option when you are limited by either challenged credit or little savings.

  • Other FHA loans include:

  • Streamline Refinance - This refinance program is offered to those who owe more than the value of the home. Exceptions have been made by FHA to eliminate the worry of low value.
  • Full 203k - This is FHA's construction loan. Repairs must exceed $35,000 and the program allows for many improvements from large remodeling projects to a complete rebuild of a home.
  • Streamline 203k - This is FHA's limited construction loan. Repairs for the Streamline cannot exceed $35,000 and the program allows for a variety of home improvements from new kitchens and/or baths to elimination of health and safety hazards.
• VA Loan - If you are a United States armed forces veteran then you are more than likely eligible for a VA home loan. Mortgage lending for veterans is flexible with no minimum credit, no down payment and no mortgage insurance. The VA does charge a funding fee for every loan; however, there are exceptions to the rules and the funding fee will vary from the type of mortgage transaction to the amount of your down payment.
• USDA - The Department of Agriculture aims to improve the quality of life for rural areas. In support of this effort, they offer 100 percent financing with flexible credit requirements for those who prefer to live in a rural community.
• Construction - Construction loans are used when you are interested in building a home from the ground up. Lenders will require at least 20 percent down with credit scores over 700. Building a new home can be exciting yet, it will require your involvement to ensure your expectations are being met.
• Second Mortgages - Second mortgages are great financial tools when used properly. When accessing your equity you should be clear on your financial goals for using your equity (e.g., paying for your child's college tuition or investing in more real estate). Lenders have strict guidelines about the approval process and they are primarily driven by credit scores and the amount of equity in your home. A lender will typically require a minimum credit score of 700 and loan-to-value limit (what you owe versus your home's value) of 80 percent—some lenders will allow up to 90 percent.