What Is An FHA Loan?

FHA home loans are mortgages insured by the federal government through the Federal Housing Administration (FHA), a branch of the Department of Housing and Urban Development. FHA home loans reduce the barrier to entry for homebuyers and refinancers by featuring low down payments, flexible credit requirements and more purchase power. If funds are limited, an FHA home loan can help you finance more than 80% of your home value.

What are FHA loan requirements?

In order to ensure that you meet the minimum FHA loan requirements, you need to consider the following factors.

• Are you over the age of 18?

• Do you have a valid Social Security number and lawful residency in the United States?

• Do you have a steady employment history? If not, have you at least worked for the same employer for the past two years?

• Can you afford the minimum down payment of 3.5% or 10% (depending on credit score)?

• Do you have a credit score above 620?

• Have you been out of bankruptcy for at least the past two years?

• Will this home be your primary residence?

You’ll likely need to be able to answer all of these questions with a hearty ‘YES’ in order to meet FHA home loan requirements.

The FHA home loan advantage

FHA home loans are backed by the federal government and offer you a myriad of advantages for your home purchase or mortgage refinance.

Minimum down payment option of 3.5% for qualified buyers

For those with credit scores of 620 and above, the down payment for an FHA loan is 3.5%. (For those with credit scores below 620, a 10% down payment is required.)

Easier to qualify

FHA requirements are, typically, less strict than typical loans. Although a credit score below 620 does not allow you to take advantage of the 3.5% down payment option, conventional lenders require a minimum credit score of 620 or higher.

No maximum income restrictions

Seller assistance with up to 6% of closing costs

FHA home loans allows the seller to pay up to 6% of the closing costs, including any costs of the appraisal, title expenses and a credit report.

203k renovation loans with a minimum 620 FICO score.

If you need extra cash to repair or renovate your home, FHA offers 203(k) loans that offer you loans based not on the current appraised value of the home, but the projected value after these renovations would take place. The extra money you receive from the loan after the purchase of the home can then go towards these renovations. This can be used to cover painting, roofing, plumbing, heating and air-conditioning and full room remodels. This is generally only eligible for those with a credit score of 620, more along the lines of a minimum credit score for a conventional loan.

Loan limits adjusted annually

FHA home loans have a maximum loan amount (or “ceiling”) that is regularly adjusted every year and vary according to the cost of living in a given area. This annual adjustment increases your likelihood of getting an FHA home loan that meets your current needs.

With an FHA loan, you can use borrowed money and other gifts from family members to cover down payments and closing costs. And don’t worry about prepayment penalties! An FHA loan lets you refinance or pay off your home early without having to deal with extra fees or other sticking points. As long as you meet FHA requirements, an FHA home loan may be within your future!

What Is A Jumbo Loan?

A non-conforming jumbo mortgage can help you purchase a lot of real estate. This mortgage is needed for loan amounts over the conforming loan limit of $484,350 and $726,525 in high-cost areas. If you need to take out a loan over the conforming limit, a fixed or adjustable rate jumbo mortgage could be your ticket to a big and beautiful home.

View Today's Jumbo Mortgage Rates

There is, however, one key difference: Jumbo loans are ineligible for purchase by Fannie Mae or Freddie Mac and must be sold in the secondary market. What does this mean? Jumbo loans can require more stringent credit guidelines and larger down payments than conforming loans.

Is a jumbo mortgage right for you?

Can you afford high-value real estate but don’t have enough saved up to bring a loan down to the conforming limit? A jumbo mortgage can help you make your move! If your financial situation is on the upswing, a jumbo loan can be a good way to bypass a starter home and purchase the full-sized home of your dreams.

Jumbo loan features

A jumbo mortgage is a great way to rapidly build your credit. On-time payments will improve your score by leaps and bounds. One important note—it may be more expensive to refinance a jumbo loan due to higher closing costs.

What Is An Adjustable Rate Mortgage?

An adjustable rate mortgage (ARM) is a home loan with an interest rate that changes after a fixed amount of time—usually 5-7 years. Adjustable rate mortgages s typically offer lower interest rates and lower monthly payments than a fixed rate mortgage. After the allotted time passes, the rate may adjust and your monthly mortgage payments will adjust accordingly.

View Today's 5-Year ARM Mortgage Rates

View Today's 7-Year ARM Mortgage Rates

If your top priority is a low monthly payment or you don't plan on staying in your home for more than 5-7 years, an adjustable rate mortgage (ARM) could be right for you. If flexibility is your top priority, this loan can be a viable alternative to a 15 or 30-year fixed rate mortgage.

Is an adjustable rate mortgage right for you?

An adjustable rate mortgage can give you low rates and extra security—important considerations when searching for your perfect home. The benefits of an adjustable rate mortgage include:

• ARM rates can be lower than a 30-year fixed rate.

•  ARMs can feature lower monthly payments early on in the loan term, allowing you to maximize cash flow.

•  ARM rates do not change during the initial term (5, 7 and 10-year options available).

•  Adjustment rate caps offer extra protection.

•  ARMs may benefit first-time homebuyers and those looking to refinance. With the lower monthly payments of ARMs, you may be able to buy a larger home you wouldn’t be able to otherwise.

As the borrower, you take advantage of lower initial payments by leveraging the possibility that the mortgage interest rate could increase after the initial term. This means that your adjustable rate mortgage transfers part of your home loan’s interest rate risk from the lender to the borrower, giving you the lowest rate on the market.

An adjustable rate mortgage is also a great way to qualify for a higher loan amount, giving you the means to purchase a more expensive home. Many homebuyers will take out large mortgages to secure a 1-year ARM and later refinance to prevent a rate hike.

However, ARMs are not the ideal mortgage solution for everyone. The following are some particularities of adjustable rate mortgages that may be less than ideal, causing you to rethink a standard fixed mortgage rate. .

•  Over the life of a loan, rates and payments can rise rather dramatically over the life of the loan. Depending on rates, is not uncommon for an ARM to double over just a few short years.

•  ARMs are generally more complex to understand than a typical fixed rate. An adjustable rate mortgage affords lenders the flexibility to determine adjustment indexes, margins, caps and more.

•  Negative amortization loans, a certain type of adjustable rate mortgage, can cause borrowers to wind up owing more money than they did to begin with. The reason is that the payments are set so very low, that even the interest is not being completely paid off. All of this then, naturally, gets rolled over to the balance, which can be formidable when all is said and done.

So, what’s the better choice? An adjustable rate mortgage or a fixed rate mortgage? This is a determination you will, of course, have to make yourself. Each offers something different. Fixed-rate mortgages offer a permanent rate and a sense of security but at rates that can seem daunting. An adjustable rate mortgage costs less initially, which is appealing, but may ultimately lead to uncertainty.

These key differences will be a huge factor in your decision but there are other important questions to answer when deciding which loan is better for you:

1. What is the current interest rate environment?

A major determining factor may be the current interest rate environment. If rates are low, a fixed-rate mortgage makes the most sense – you’re in an ideal financial environment that you won’t want to jeopardize. However, if rates have become high, things change. With an adjustable rate mortgage, you have a lower initial rate to begin with and if (and when) rates eventually fall, you may well wind up with lower payments. In the meantime, you get to enjoy the benefits of owning your own home.

2. Do you plan on staying in the home long?

If not, an adjustable rate mortgage may be the right call. Your initial payment and rate will be low and, if you’re only planning to stay for a few years, you’ll avoid exposure to the huge rate adjustments that can be an ARMs downfall. Meanwhile, you can build up your savings for the more ideal home you may have your eye on.

3. When is the adjustment for the ARM made? How frequently does it adjust?

After an initial fixed period, odds are your adjustable rate mortgage will adjust fairly frequently. Usually, this is on the same date as the initial mortgage making it a yearly anniversary you can count on, but in some cases they adjust much more frequently – sometimes even every month. For some, this can be volatile and overwhelming making a fixed-rate mortgage more appealing.

What Is A 15 Year Fixed Rate Mortgage?

A conventional 15-year fixed rate mortgage is similar to a 30-year fixed rate mortgage in many respects. A conforming 15-year fixed rate loan features a limit of $484,350 ($726,525 in high-cost areas) and a consistent rate throughout its lifetime, giving you secure and predictable monthly mortgage payments. So what does this loan offer that a 30-year fixed rate loan doesn’t?

View Today's 15-Year Fixed Mortgage Rates

The main difference is the length. With a 15-year mortgage, you’ll pay off your mortgage in half the time, putting you on the fast track to full amortization. A 15-year fixed rate mortgage also features lower rates than its 30-year counterpart. A shorter loan term plus lower mortgage rates means less interest on your loan and more money in your bank account! Conventional 15-year fixed rate mortgage features include:

• 3-5% minimum down payment options for qualified homebuyers.

• Regular, qualified income required.

• No private mortgage insurance (PMI) with 20% or more down.

• Seller assistance with up to 3% of closing costs.

• Loan options up to $5 million for non-conforming mortgages.

• Home Style renovation loans with options as little as 5% down.

• 203k renovation loans with a minimum 620 FICO score.

Is a 15-year fixed rate mortgage right for you?

A 15-year fixed rate mortgage is popular with two different demographics. Younger homebuyers with sufficient income often use it to pay off their home before their children start college, while older homebuyers with established careers and higher income use it to pay off their mortgages before retiring. A word to the wise: 15-year fixed rate mortgages feature higher monthly payments than a 30-year loan. You’ll need to factor that into your budget when deciding whether this loan fits your needs.

What Is A 30 Year Fixed Rate Mortgage?

What is a 30-year fixed rate mortgage?

A conventional 30-year fixed rate mortgage features a steady interest rate throughout its lifetime. Spanning three decades, homeowners with this mortgage can look forward to consistent monthly payments for many years to come, which can provide peace of mind and help them budget their finances. A conforming 30-year fixed rate loan offers amounts up to $484,350 in most of the US and a maximum of $726,525 in high-cost areas. To decide if a 30-year fixed mortgage is right for you, ask yourself these four questions:

View Today's 30-Year Fixed Mortgage Rates

• How long are you planning to stay in your home? If you are considering a 30-year fixed rate mortgage, you should be planning to stay put for the long haul. We recommend a minimum of 5-10 years in your new home.

• Would you prefer consistent monthly mortgage payments? Like the sun rising in the east, the terms of a 30-year fixed rate mortgage never change. A consistent interest rate throughout the lifespan of your loan keeps your monthly mortgage payments the same for 360 months. Kiss those fluctuating mortgage payments goodbye!

• Would you prefer a low mortgage payment? Due to the long-term nature of this loan, a 30-year fixed rate mortgage makes your monthly mortgage payments more affordable than a fixed rate mortgage with a shorter time frame. You end up paying more interest over three decades, but the principal repayment is spread over that same period of time. Lower monthly mortgage bills mean you can afford more house!

• Are you purchasing or refinancing? Looking to buy a new home? This mortgage option is tailor-made for you. Looking to refinance your home at a lower rate? A 30-year loan may be too long. Consider a shorter term fixed mortgage or an adjustable rate mortgage based on your budget and refinancing goals.

Conventional 30-year fixed rate mortgage features include:

• 3-5% minimum down payment options for qualified homebuyers.

• Regular, qualified income required.

• No private mortgage insurance (PMI) with 20% or more down.

• Home Style renovation loans with options as little as 5% down .

• Seller assistance with up to 3% of closing costs.

• Loan options up to $5 million for non-conforming mortgages.

• 203k renovation loans with a minimum 620 FICO score.

30-Year Fixed Mortgage Payments

As with most amortized loans, the initial payments of your 30-year fixed rate mortgage are primarily devoted to paying off interest. As the years roll by, this will gradually shift and you’ll reach a point where your monthly payments cover more principal than interest.

What does this mean? As you embark on your 30-year fixed rate mortgage, your first couple years of mortgage payments won’t make much of a dent in your loan’s principal balance. Once you pay off most of the interest, the latter years of your mortgage will be devoted to your principal and you’ll see your mortgage balance decrease dramatically.

Types Of Home Loans

Which Mortgage is right for you?

There are a number of different types of home loans available to you, and it can pay to familiarize yourself with them. It only takes a few minutes to review your home loan options and get an idea of what might provide the best value for your needs

Home loan options include:

30-Year Fixed Rate Mortgage

Settle down for the long haul with a 30-year fixed rate mortgage. Because of the steady interest rate inherent to a conventional 30-year fixed rate mortgage, you can look forward to consistent monthly payments for many years to come, providing you with peace of mind and a consistent budget. We recommend this type of home loan if you're planning to stay in your home for a minimum of 5-10 years.

15-Year Fixed Rate Mortgage

Pay off your home twice as fast with a 15-year fixed rate mortgage. Your rate stays the same throughout the life of the loan, giving you secure and predictable monthly mortgage payments and less interest on your loan. Get on the fast track to amortization with this home loan option.

Adjustable Rate Mortgage

Keep your options open with an Adjustable Rate Mortgage (ARM). This type of home loan features an interest rate that changes after a fixed amount of time. ARMs are a great home-buying option and typically offer lower interest rates than fixed mortgages and extra protection with rate caps.

Jumbo Loan

Move into your forever home with a jumbo loan. Need a loan that exceeds the current conforming limit? A fixed or adjustable jumbo mortgage can help you make your move. This type of home loan will allow you to buy a lot of real estate but can also require more stringent credit guidelines and a larger down payment.

FHA Loan

Make your home ownership dreams come true with an FHA loan. Featuring flexible credit restrictions and down payment options as low as 3.5%, an FHA loan is a popular type of loan for first-time home buyers.

VA home loan

Enjoy exclusive military benefits with a VA loan. If you are a veteran or an active-duty service member, a VA loan offers less restrictive credit guidelines and low down payment options for you and your family.

Interest Only Mortgage

Free up your cash flow with an interest only mortgage. Take advantage of the low monthly payments right off the bat to afford a more expensive home and invest your income elsewhere.

The Fed LOWERS interest rates

CONCERNS ABOUT INTEREST RATES

The Federal Open Market Committee announced that they have once again lowered the Federal Funds Rate!

How does a rate cut impact home buyers and home owners?
The Fed does not directly set mortgage rates; however, mortgage rates are historically low! Home buyers or home owners with specific needs and circumstances could benefit from today's great rates by:
- Buying a new home with the increased purchasing power that comes with lower interest rates.
- Refinancing to eliminate mortgage insurance or to get a lower interest rate.
- Consolidating debt.
- Financing home renovations.
- Leveraging home equity to fund educational or other major expenses.

What does the Fed rate have to do with the housing market and economy?
-The Fed does not decide mortgage rates, but it can indirectly influence them since the Fed's decision is based on driving a healthy economy.
- Mortgage rates are hard to predict and are more closely tied to mortgage backed securities, but the Fed rate can impact adjustable rate mortgages and home equity lines of credit.
- Short - term debt (like credit cards) typically see an impact when the Fed makes rate adjustments.
- Lowering the rate to 1.75 - 2.00% supports the Fed's mission to foster maximum employment and price stability.

Important Reminders When Buying A Home

1.Buyers should avoid changing jobs, becoming self-employed, or quitting their job on or before closing day.

2. Avoid making any big purchases such as buying a new vehicle, appliances, boats, etc.

3.Buying furniture and new items for your home is exciting, but remember not to use credit cards or let any accounts fall behind.

4.Avoid switching banks and do not make large deposits in your bank accounts without first checking with your mortgage lender / loan officer.

5.Do not cosign on a loan or credit card for anyone before closing

The Benefits of Buying A Home

Tax Savings

The government rewards homeowners by providing excellent tax benefits. The interest paid on your mortgage and other home related expenses can generally be deducted from your income.

Appreciation

Home values have well documented history of going up over time. This increase becomes equity you can benefit from when you refinance or sell your home.

Equity

Renting has often been compared to paying 100% interest, but when you own a home and a mortgage is in place, a portion of your payment goes toward the principal balance on your loan. This builds your equity and acts as a savings account.

Roots

People who own rather than rent stay in their homes four times longer. This provides an opportunity to get to know your neighbors and connect with your local community.

Happiness

The feeling of owing your home is unmatched. You can fix it up, make it your own, get a dog or plant a tree if you want. Doesn’t that sound exciting?!

Education

Research shows children of homeowners earn higher test scores and graduate at a higher percentage than renters.

What is Title Insurance?

When you purchase a home, you want to have assurance that there are no problems with the home’s title. Anything attached to the property and/or defects on the title can limit your use and enjoyment of the property, as well as bring financial loss. Title Insurance is purchased in order to protect you or inform you of these things.

A title search is done to help identify ownership of the property, what other rights might affect a property and what rights need to be extinguished in order to insure a new party.

How is a title search prepared and what research is done?

After a sales contract has been accepted, a title professional will search the public records to look for any problems with the home’s title and to identify all the items that affect its use and the sale. The search typically involves a review of land records going back many years. They also search bankruptcy, OFAC, county assessor, GIS mapping and other databases in order to get as much information as possible.

More than 1/3 of all title searches reveal a title problem that title professionals fix before you go to closing. Examples of title issues:
1. Liens from debt incurred by owners that are not released properly.
2. Previous owner may have had minor construction done on the property, but never fully paid the contractor.
3. Errors and/or omissions in recorded documents affecting the property conveyed.

Title professionals seek to resolve problems like these before you go to closing and an insurance policy issued to protect against them.

Who Gets Title Insurance?

The Owner’s Policy
Sometimes title problems occur that could not be found in the public records or are inadvertently missed in the title search process. To help protect owners, they can obtain an Owner’s Policy of Title Insurance to insure against these. Owner’s Title Insurance, called an Owner’s Policy, is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing and lasts for as long as you or your heirs have an interest in the property. The cost of fees to insure is based on rates filed by the insurer with the state relating to the amount of coverage.

An Owner’s Policy provides assurance that your title company will stand behind you, monetarily and with legal defense if needed, if a covered title problem arises after you buy your home. The bottom line is that your title company will be there to help pay valid claims and possibly cover the costs of defending an attack on your title.

The Lender’s Title Policy

Most lenders usually require a Loan Policy when they issue a loan. The Loan Policy is usually based on the dollar amount of your loan. It protects the lender’s interests in the property should they need to foreclose, providing assurance against the inability to foreclose and their lien position. Traditionally, this policy is a cost to the buyers.