Today's mortgage marketplace has an abundance of loan options. Choosing the option that is best suited for your situation can be difficult. CambridgeHomeLoan is here to help you understand your options and choose the right loan for you. When you first make contact with your mortgage broker, explain all of your interests and concerns. Let them understand what you are trying to accomplish and they will review the best options for you to accomplish those goals. See below some of the various programs available to you.
Fixed rate mortgages is the most popular type of home loan today. They have the advantage of consistent interest as well as principal payments throughout the life of the loan. For a first time home buyers or a homeowner that intends to live in their property for the long term and if the current interest rates are relatively low, then a fixed rate option would be best.
Fixed rate loans offer a number of terms that range from 10 to 30 years in 5 year increments. The most common terms are a 10 year, a 15 , 20, 25 and 30 year terms. The longer the term that you choose, the lower your monthly payment will be. The shorter the term of the loan, the higher the monthly payment. With short term loans you will payoff your loan sooner but your monthly payments will be higher.
Adjustable rate mortgage loans and hybrid home loans have features in the loan documents that allow the interest rate to be changed based upon pre arranged terms. Hybrid loans can have a rate that is fixed at the beginning stages of the loan, such as 3 or 5 years of a fixed rate and then to adjust one time per year. Such loans are presented as 3/1 and 5/1 hybrids. The 5/1 loan would be fixed for the initial 5years and then can adjust each year thereafter. Be careful to read the fine print in the loan documents carefully.
Why should I choose an adjustable rate loan? In the event you are purchasing a property and intend to keep the property for only 5 years or less, you may decide to go with an adjustable rate. By choosing to go with an adjustable rate loan, you will be able to take advantage of the lower rate and thus lower initial payments.
Conventional home loans are those approved using Freddie Mac or Fannie Mae guidelines and are currently the most popular in the market today. A conventional home loan refinance will require a minimum of a 10% equity position, meaning that the new loan amount must be no more than 90% of the current appraised value of the home. Remember, for all conventional loans where the mortgage is above 80% of the current value of the home, private mortgage insurance will be required. PMI is paid in monthly installments along with the monthly mortgage payment.
A conventional loan is the most common loan in the marketplace today and lenders will compete with one another to win your business. Increased competition typically means more competitive rates.
FHA, VA and USDA loans are government-backed loans due to the fact that the government is providing a guarantee to the lender. When you are refinancing an existing, FHA, VA and USDA loan, the loan can be refinanced with less paperwork. often referred to as a “streamline” refinance. A streamline FHA Loan will not require income or employment verification, no minimum credit score and relaxed appraisal standards.
When replacing an existing FHA loan with a new one qualifies for the FHA streamline status. This means no tax returns, pay check stubs or W2 forms are required. There is no minimum credit score required, either. Lenders will however research your mortgage credit history to make sure that there are no more than one late payment made within the past 12 months that was more than 30 days past due and no additional late payments made within the previous 6 months.
FHA loans do require PMI mortgage insurance. A mortgage insurance payment is due upfront and it is rolled into the loan amount. A mortgage insurance premium is one paid every year and is made with monthly installment payments. An FHA streamline doesn't allow you to roll in your closing costs but does allow you to roll in the new mortgage insurance premium.
FHA Streamline status is also available for refinancing existing VA home loans, again as long as the old VA loan is being replaced by a new one. The streamline does not require a credit report, appraisal, income bank statements or employment documentation. As long as the interest rate is lowered when refinancing an existing VA loan or the borrowers are switching from an ARM to a fixed, a VA streamline loan is an excellent choice and can be applied for HERE!