Posts in Home Loans
What is Imminent Default?

Many borrowers are unaware that lenders have the ability to determine and designate when borrowers reach a state of what is known as “Imminent Default”. This is when a borrower is more than likely to default on a mortgage loan agreement.

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What is the HECM for Purchase Program?

The Home Equity Conversion Mortgage for Purchase program is a part of HUD’s larger HECM program. It allows eligible home buyers to get a reverse mortgage and purchase a home, all under one single mortgage transaction.

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What is Forbearance?

Mortgage forbearance is a payment relief option offered in many mortgage modification programs that involves the temporary delay or suspension of monthly mortgage payments for an agreed upon amount of time. In some cases, it can be a temporary reduction of the loan’s principal amount.  

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What is a 1-Year Adjustable Rate Mortgage?

The 1-Year ARM, though rare, is yet another hybrid adjustable rate mortgage option available to borrowers. As the name suggests, a 1-Year ARM has an initial period of one year with a fixed interest rate. After the initial year, the fixed interest rate converts into an adjustable interest rate, that can be adjusted or “reset” on a yearly basis (annually).

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What are Interest Rate Caps?

When you get an adjustable rate mortgage, the interest rate changes at set intervals in accordance with the market. In order to keep the rate from rising too high too fast, interest rate caps were introduced, to ensure the rate could only change at a manageable pace.

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What is a Gift of Equity?

When a homeowner sells their home to a family member at a price well below the market value, it is sometimes considered a gift of equity.

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The Difference Between the Interest Rate and the Annual Percentage Rate (APR)

Home buyers should be aware of the interest rate on the principal loan amount and the annual percentage rate that represents the total cost of borrowing.

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What’s a No-Doc Mortgage Loan?

As the name implies, these loans required little, if any, documentation to evaluate your creditworthiness and your ability to repay the loan.

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Graduated Payment Mortgages

Graduated payment mortgages or GPMs let you start out with a reduced monthly payment that gradually grows to the full payment amount over time.

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What is the Right of Rescission?

The right of rescission is a borrower’s right, as granted by the Truth in Lending Act, to cancel a contract within three days of having already signed the contract agreement for a home equity loan, home equity line of credit, or mortgage refinance.

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What are Interested Party Contributions?

Interested Party Contributions are costs or fees paid by a party other than the seller, who has a stake of interest in the sale of the property.

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DTC: Debt to Credit Ratio in Relation to Home Loans

Your debt-to-credit Ratio (DTC), sometimes known as your credit utilization ratio, is a value that expresses the relation between the amount of credit you have used and your credit limit. DTC is often expressed as a percentage; the higher the percentage, the closer you are to reaching your credit limit. DTC is an important factor in many financial transactions, the most important of which is being one of the factors that helps determine your credit score.

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What are Assumable Mortgages?

An assumable Mortgage is a home loan that can be transferred from the seller to be taken over or “assumed” by the buyer, becoming their responsibility to pay off. Of course, this requires the approval of the lender servicing the loan, and even then, not all loans are assumable.

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What Is A Piggyback Loan?

When purchasing a new home, you may need or want a “piggyback loan” which is  literally a loan that piggybacks off another loan. Basically, it’s two loans that are opened simultaneously. The first loan is generally 80 percent of the purchase price of home. The second is typically a home equity line of credit (HELOC) on top of the first mortgage.

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What Is a Community Seconds Mortgage?

If you want to get a home loan through Fannie Mae, but you don’t have a lot of cash to use for a down payment, a community seconds mortgage could be a great option. A community seconds mortgage is a subordinate, or second, mortgage that is used in combination with a Fannie Mae loan to finance the down payment on a home.

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What Are the 97% LTV Loan Options?

If you’re looking to purchase a home and don’t have much cash on hand for a down payment, you might want to look into a 97% LTV loan. Fortunately, Fannie Mae’s Conventional 97 mortgage program offers such a loan -- and it’s a pretty great option for a lot of home buyers.

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What is an 80-10-10 Loan?

Private mortgage insurance, or PMI, is one expense that most homeowners would rather live without. While you can ask your lender to cancel PMI once you’ve accumulated 20% equity in your home, that could take a while. So, to sidestep PMI, many borrowers have decided to take out an 80-10-10 loan -- effectively taking out two mortgages at once in order to avoid mortgage insurance altogether.

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Can I Get a Lower Rate Without Refinancing?

If you’re feeling the heat from paying a high interest rate on your mortgage, you might be considering refinancing your home. However, consider this: refinancing usually requires a ton of paperwork, a lot of time, and a whole new set of closing costs.

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Is a VA loan Better Than a Conventional Loan?

If you’re a veteran or surviving spouse who qualifies for a VA loan, you might be wondering if it’s really the most cost-effective way to buy a home. Since VA loans do have a wide variety of benefits, most people would say yes. But, in reality, the truth can be more complex; while VA loans are often the best option for eligible borrowers, they aren’t always the smartest choice. Keep reading to learn when to use a VA loan and when to stick to a conventional mortgage, and why.

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How to Save Your Home and Avoid Foreclosure

If you’ve fallen behind on your mortgage payments -- or you think you’re about to, you could be in a sticky situation. You want to keep your home and avoid defaulting (or contributing to default) on your mortgage, but you’re not sure what to do. One potential solution may be a loan modification program, in which your lender amends the terms of your home loan in order to make it easier for you to pay them back.

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How do I check my VA loan eligibility?

Loans from the Department of Veterans Affairs, commonly known as VA loans, are some of the most attractive home loans out there -- offering the potential for zero down payments and qualification with credit scores as low as 620. If you served in any branch of the U.S. military and separated under any condition that is not dishonorable, you might qualify for a VA loan.

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How do you qualify for a jumbo loan?

If you want to buy a particularly expensive home -- one above the conforming loan limits in the state and county where you’re buying -- you’ll likely need a jumbo loan. While jumbo loans can often allow you to purchase a bigger and better home, they can also be more difficult to qualify for. Here are the basics of qualification for a jumbo loan.

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FHA 5/1 ARM: FHA 5/1 Adjustable Rate Mortgage in Home Loans

A FHA 5/1 ARM is a kind of hybrid mortgage in which interest rates remain fixed for a 5-year period, but can then increase after that due to changes in market interest rates. Unlike regular ARMs, an FHA 5/1 ARM is insured by the government, which can give you some serious benefits.

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All About FHA Construction Loans

If you can’t find your dream home on the market, you might just want to build it yourself! But traditional construction loans can often be complex and expensive-- so what if you could turn to the trusty FHA to get a home construction loan that won’t completely empty your bank account? Well, it turns out you can.

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Savings Comparison: 15-Year Fixed-rate vs. 30-Year Fixed Rate Mortgage?

While a 30-year fixed-rate mortgage is currently the most popular home loan product in the United States, another type of home loan, the 15-year fixed-rate mortgage, is growing in popularity. A 15-year FRM allows borrowers to save thousands in interest, while having their home paid off significantly faster. Of course, borrowers will have to fork over more each month in payments, but that can be well worth it due to the long-term benefits of this kind of loan product.

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What Is Underwriting for a Home Loan?

Loan origination for mortgages is a slightly more complex process that involves a step known as underwriting. Mortgage underwriting is a process in which the lender determines the risk of offering a home loan to a borrower, based on certain parameters. It is up to an underwriter to make the final decision on whether or not to approve a mortgage.

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What is Loan Origination?

The term loan origination encompasses the process that begins when a borrower applies for a new loan, through the processing of the application by the lender, and ultimately ends with either an approval and disbursement of funds, or a declination. If the loan is approved, the loan origination date is the date at which the loan is funded.

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What are 97% LTV Loans?

If you want to buy a home but have very little cash, Fannie Mae and Freddie Mac might have a solution for you. A 97% LTV loan allows you to make a down payment that’s as little as 3% of your home’s purchase price. That means these homes have an even smaller down payment requirement than FHA loans, which typically require at least 3.5% down.

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What is a Payment Option ARM?

A payment option ARM is a kind of adjustable rate mortgage that provides a borrower with a variety of methods to pay off their loan each month. At first, borrowers will be required to make a specific payment based on a temporary, starting interest rate. After a certain period, they can switch to any other of the payment options, including a minimum payment, which often doesn’t cover the interest of the loan.

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What is Negative Amortization?

Most home loans are fully amortizing. This means that the borrower makes monthly payments of both interest and principal, typically, allowing the homeowner to build home equity over time. Despite that, some loans are negatively amortizing, meaning that the borrower is making payments that are actually less than the interest owed on the loan. This means that the principal owed on the loan increases over time -- which can often leave borrowers in a sticky position when it comes time to pay up.

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What is an interest only loan?

An interest-only loan is a mortgage in which a borrower only pays the interest (not the principal) on their loan for a set period of time, usually between 5 and 10 years. Then, the borrower will either begin paying down the principal, make a lump sum payment, or sell the house.

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What do you need to qualify for a conventional loan?

Qualifying for a conventional loan varies by lender. Many different factors come in to play, such as credit score, employment history, debt to income ratio, how much you are willing to spend on a down payment, and even the amount you are trying to borrow.

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What is the best type of mortgage for me?

As a future homeowner, choosing the best mortgage for you is like choosing the best career path: there are tons of options, but only a handful that you’ll qualify for, and even fewer that will really make you happy. The good news is that by asking yourself which mortgage is best for you, you’re already thinking like a savvy consumer -- you recognize that you have a choice between many different mortgage products, and it’s just a matter of narrowing them down.

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What Is the Difference Between a Conventional Loan and an FHA Loan?

A conventional home loan and an FHA loan are both mortgage products that make it possible for home buyers to finance the purchase of a house. While they both help prospective home buyers to get the funding they need to buy a house, they have very different qualities, requirements, and terms.

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What Does a Mortgage Broker Do for You?

Mortgage brokers act as intermediaries whose job is to help connect buyers with investors and banks. Essentially, they collect your information and shop around for relevant mortgage options based on the information they collect from you. Mortgage brokers take care of all of the dirty work, so you don’t have to deal with the stress of finding lenders, getting quotes, and sitting in those highly uncomfortable waiting areas that most banks have.

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What Is a Floating Rate Loan?

A floating interest rate is also known as an adjustable or variable interest rate. The name comes from the fluidity of the interest rate that borrowers must contend with, as the interest percentage fluctuates throughout the life of the loan (for hybrid ARMs, the rate fluctuates after the introductory period ends). The interest rate is affected by the market’s margins or mortgage index.

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What is an FHA 245 Mortgage Loan?

Under section 245 of the FHA home loan program, home buyers with low income who expect their monthly earnings to increase may be eligible for a growing equity home loan. These home loans are designed to cushion the upfront costs for home buyers that may not be able to afford them. This is especially well-suited for first-time home buyers.

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What is a Balloon Home Loan?

A balloon loan is a type of mortgage that doesn’t fully amortize over the life of the loan, leaving a large “balloon payment” due at the end of the mortgage. Home loans with balloon payments have lower monthly payments in the years leading up when the balloon payment is due, but the size of many of these payments often makes it difficult (or impossible) for borrowers to pay them off. For example, many balloon loans have a term of 5 to 7 years (after which the balloon payment is due), while the regular, monthly mortgage payments are based off a 30-year loan term.

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When to Consider a Reverse Mortgage

Reverse mortgages can be a useful tool for seniors and retirees for a variety of reasons. Much like with social security, the value of a reverse mortgage increases the longer you can hold out. The benefit of aging is qualifying for more money from your reverse mortgage. After all, the maximum amount you are eligible to borrow uses your age as one of the determining factors.

You must be 62 years of age or older to be eligible for a reverse mortgage, but that doesn’t mean you should jump at the opportunity right after blowing out your birthday candles. Remember, it pays to wait.

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30-year FRM: 30-Year Fixed Rate Mortgages Explained

What’s it mean to have a 30-year mortgage? Simply put, your loan rate, plus the principal and interest payments, are secured for 30 full years. Because your loan amortizes, it will be paid in full on that last payment in year 30. You’ll never have to pay another cent to the mortgage company after that. Your insurance, homeowners’ association fees, and taxes may continue to slowly climb, but those are the only expenses you’ll have to worry about if you never refinance or take out a second mortgage.

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What are the FHA Lending Rates?

The major banks in the United States use the Federal Funds Rate as a rule of thumb for establishing their own Prime Rates. Most of the time, any individual bank’s Prime Rate is the FFR plus about 300 basis points, or three percent. So, if the FFR is 1.5 percent, the FHA lending rate might be 5.5 percent. Or it could be 3 percent. This all depends on how badly those banks want to do business with FHA borrowers.


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How Do I Get a Home Loan Quote?

You’ve been saving money for awhile and working on your credit, and you’re pretty sure you’re ready to buy a house. But how do you get the ball rolling? Don’t you need a home loan quote or something?

Although getting started with a mortgage is both stressful and filled with paperwork you never knew you’d need, it’s not impossible. Let’s walk through what’s required for a home loan quote, otherwise known as a mortgage pre-qualification.

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What is a 40-Year Mortgage?

If you’ve been house hunting before, or even paying attention to some of the commercials for mortgage products, you’ve no doubt seen tons of references to the 30 year mortgage. This is the gold standard and default mortgage for most of the industry, but it’s not the only loan out there. In fact, it’s not even the longest term mortgage available.

There’s another loan that no one really talks about these days: the 40 year mortgage.

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What is a 30-Year Mortgage?

The 30-year mortgage, the steak and potatoes of the home lending world, is the most common type of mortgage you’ll run into as a home buyer. It’s so common that the Consumer Expenditure Survey provided by the Bureau of Labor Statistics determined that between 2004 and 2014, 61.49 percent of all mortgages were 30 year fixed rate mortgages. The second most common type, 15 year fixed rates, only made up 14.64 percent of the market.

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Home Loans with Bad Credit and No Down Payment

When you were in school, it was horrifying to hear that something would be put on your “permanent record.” But, as it turned out, that wasn’t such a big deal. The only permanent record you have to fear as an adult is your credit file. A rocky start or even a prolonged hard spot can make it very difficult to buy a home of your own. When you couple that problem with having a small or nonexistent down payment, there aren’t a lot of options for purchase.

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What credit score do you need to qualify for a conventional home loan?

Everyone’s heard tales of how difficult it is to qualify for one of the most coveted products in the mortgage world: the conventional loan. Although there’s nothing particularly exciting about these mortgages, they do offer lower mortgage insurance rates and fewer fees at closing than other types of home loans.

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Are mortgage closing costs negotiable?

First and foremost, it is imperative to remember that you ultimately choose your mortgage lender, which means, there are choices – and the lender has the primary impact on the charges tacked on to your closing costs. This fact is advantageous to the buyer and should be used as a tool to compare estimated closing costs that lenders detail in the Loan Estimate.

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Are closing costs included in the mortgage loan?

Closing costs are the fees charged for services provided by your lender to assist in closing on a property. The fees are typically required to be paid upfront at closing; however, depending on your specific loan to value ratio, and the equity in your home or loan type, you may be able to roll the closing costs into the mortgage loan. 

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What is a Partially Amortizing Loan?

Many of us are familiar with amortization and fully amortizing loans. But not all amortized loans are fully amortizing. There are actually a subset of loans that are partially amortizing. These loans are not especially common in the home loan market, but they do exist.

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What is the Meaning of Amortization?

Amortization refers to a type of payment schedule that some home loans utilize. The payment schedule is made up of equal payment amounts that are stretched over a designated amount of time (the loan term). For the purpose of an amortization schedule, each payment is divided into two portions. There is a portion that is made up of interest (the cost of the loan), and a portion that is made up of principal (the value of the borrowed sum).

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Amortized Loans in Relation to Home Loans

Amortized home loans have been the mainstream payment method for mortgages for a long time. They were introduced to the housing market thanks to intervention from the Federal Housing Administration (FHA), which led to the formation of a fully amortizing 30-year fixed rate home loan.

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What is an Interest-Only Mortgage?

When most homeowners get a mortgage, they start paying both the interest and the principal immediately -- but they don’t always have to. One kind of home loan, called an interest-only mortgage, allows the buyer to put off paying any of the principal for a number of years while they save money and strengthen their financial position. But, just because you don’t have to pay principal doesn’t mean you can’t; many homebuyers just like to have an option that frees up more cash for their budget.

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What Credit Score Do You Need to Get a Home Equity Loan?

Can you get a home equity loan with a bad credit score? You’re hoping so, now. When you bought your house, the pink bathroom was cute and retro, but after living with it for years, you’re about ready to spray paint the whole thing just to get a break. But with bad credit, what are your options when it comes to renovating?

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Acceptable Credit Score for a Home Equity Loan

Home equity loans can help homeowners pay for big expenses without having to refinance their homes or take out a personal loan. Instead, the equity in your home acts like a piggy bank, allowing you to take out a separate loan for a specific purpose (or, in the case of a HELOC, establish a credit line) and repay it over a longer period of time than other types of credit generally allow. It’s an affordable option for many people, but there are guidelines for underwriting home equity loans, and credit scores are included in that mix.

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DTI: Debt to Income Ratio in Home Loans

DTI, or debt-to-income ratio, is a measurement that banks and other lenders use to compare an individual’s debt payments to their overall income. They usually use this as a way to determine someone’s predicted ability to repay future debts. You can calculate DTI by dividing your total monthly debt (recurring expenses only), by your gross monthly income.

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Finding Home Equity Loans with Bad Credit

When the going gets tough, sometimes, the tough get a home equity loan. There are always going to be times in life when you could use an injection of cash, whether that’s because you’re trying to breathe life into a startup, needing to update your kitchen, or you just got a little behind on bills. A home equity loan can be an excellent weapon in your life improvement war, but if your credit is on the poor side, it can make finding a home equity loan tricky.

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What Is Jumbo Adjustable Rate Mortgage Loan?

An ARM jumbo loan is an adjustable rate mortgage that exceeds the Fannie Mae and Freddie Mac loan-servicing limits. This amount, for most American counties, is $453,100. For more expensive areas, that limit can go as high as $679,650. Right now, ARM jumbo loans are becoming incredibly popular -- with statistics suggesting that around 75% of ARMs currently issued are actually for jumbo loans. Of that 75%, 47% of those home loans are for more than $1 million.

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Hybrid ARM: Hybrid Adjustable Rate Mortgages in Home Loans

A hybrid ARM is a mortgage that combines elements of a traditional fixed-rate mortgage and an adjustable-rate mortgage. To do this, a hybrid ARM has two parts, or stages: during the first part of the loan, the interest rate is fixed, meaning it doesn’t change. During the second part, the rate will change based on a specific market index. 

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FHA 7/1 ARM: FHA 7/1 Adjustable Rate Mortgage in Home Loans

An FHA 7/1 ARM is a kind of hybrid home loan that’s insured by the Federal Housing Administration (FHA). If you get a FHA 7/1 ARM, your interest rate will be fixed for the first seven years of the loan, and can then be adjusted afterward when the variable interest rate portion of the loan begins. Like other ARMs, FHA 7/1 ARM variable interest rates are based on a index rate -- which is usually the rate at which banks in a certain area lend money to each other.

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3/1 ARM: 3/1 Adjustable Rate Mortgage in Home Loans

A 3/1 ARM is an adjustable-rate mortgage in which the rate is fixed for the first three years of the loan. As a hybrid mortgage, it has elements of both a traditional fixed-rate mortgage and an adjustable (or variable) rate loan. As with pretty much all hybrid rate mortgages, the shorter the period of the fixed-rate part of the loan, the lower the initial interest rate. That’s the bank’s way of compensating you for the increased risk you’re taking on when the adjustable part of the mortgage kicks in.

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10/1 ARM: 10/1 Adjustable Rate Mortgage in Home Loans

A 10/1 ARM is one type of hybrid adjustable-rate mortgage. Much like other hybrid loans, a 10/1 ARM has a fixed period (in this case, 10 years) during which your interest rate won’t change. That makes it one of the safest types of hybrid mortgages, as it gives you a lot of time to figure out your financial situation and determine whether you want to continue owning your home after the adjustable-rate period begins.

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7/6 ARM: 7/6 Adjustable Rate Mortgage in Home Loans

A 7/6 ARM is a hybrid adjustable-rate mortgage with a fixed-rate period of seven years. Unlike its cousin, the 7/1 ARM (which has one-year adjustment periods), the interest rates on a 7/6 ARM can be adjusted once every 6 months during the variable-interest part of the loan.

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7/1 ARM: 7/1 Adjustable Rate Mortgage in Home Loans

A 7/1 ARM is a kind of adjustable rate mortgage -- in this case, one that has a fixed interest rate for seven years. After that, the interest rate can change, usually depending on changes in the market interest rate. Like its cousins 3/1 ARMs and 10/1 ARMs, a 7/1 ARM is considered a hybrid mortgage because it has both a fixed-rate and a variable-rate interest period.

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5/6 ARM: 5/6 Adjustable Rate Mortgage in Home Loans

A 5/6 ARM is a kind of hybrid adjustable-rate mortgage in which the fixed interest rate period of the mortgage lasts for 5 years. After the fixed-rate period is over, the variable-interest rate part of the mortgage begins.

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3/6 ARM: 3/6 Adjustable Rate Mortgage in Home Loans

A 3/6 ARM is a type of hybrid adjustable rate mortgage in which the initial, fixed rate portion of the loan lasts 3 years, after which the adjustable-rate part of the mortgage begins.

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What are the Requirements for an FHA Loan?

In basic terms, an FHA loan is a government-insured mortgage. Due to the fact that these loans are being offered by the government, instead of a for-profit company, FHA loans have a variety of benefits that can make it easier for you to buy your dream home without breaking a big sweat.

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How do you calculate mortgage insurance?

Mortgage insurance is a type of insurance policy that covers the lender in case the borrower defaults on the loan. It is usually required in the form of private mortgage insurance (PMI) when borrowers don’t make a down payment of at least 20% on most conventional loans. For FHA loans, it’s called a mandatory mortgage insurance premium (MIP).  If you fit into either of those categories, then mortgage insurance is something you’ll have to deal with.

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How Do You Get a Home Loan?

Getting a home, and the mortgage that comes with it could be the most important financial transaction you ever make. But how do you go about getting a home loan?

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What Is a Variable Interest Rate on a Home Loan?

Much like vanilla and chocolate ice cream, home mortgage loans come in two main flavors: adjustable rate home loans, and fixed rate home loans. While the interest rate on a fixed rate loan stays the same throughout the entire life of the loan, an adjustable (or variable) interest rate loan can go up or down, depending on market conditions.

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Reverse Mortgages: How Much Money Do You Get (and When Do You Get It)?

The amount of money you get from a reverse mortgage is dependent on the type of loan and the method you choose to receive your payments. There are three types of reverse mortgages: Single Purpose, Proprietary, and the Home Equity Conversion Mortgage (HECM).

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How Much of a Down Payment Is Required for a Jumbo Loan?

A 20% down payment (the standard for conventional loans) is often required for a jumbo loan -- but this isn’t always the case, and some borrowers may be able to obtain loans with down payments as low as 10-15%.

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What Does It Take to Qualify for a Jumbo Loan?

While things have loosened up since the first few years after the crisis, requirements are still a bit stricter, and most potential jumbo loan borrowers should expect to make at least a 15% down payment. They should also carefully record and document their income. Plus, they may have to be okay with getting an adjustable rate loan, and making sure that their monthly payment does not exceed 38% of their income before taxes. 

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What Is Considered a Jumbo Loan in Each State?

A jumbo home loan is a loan that exceeds a specific amount, called the conforming loan limit. The conforming loan limit is actually calculated by county -- not by state, so depending on where exactly you live, you could face a different conforming loan limit. For most U.S. counties, the limit is set at $453,100, a nice increase from 2017’s $424,100.

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What is an FHA Jumbo Loan?

Just like private lenders, the Federal Housing Administration offers FHA jumbo loans for qualified borrowers. Much like regular FHA loans, FHA jumbo loans usually have significantly lower down payment requirements than their private counterparts.

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Is It Worth It to Take on a Loan with PMI?

Taking on a loan with PMI can often increase the amount of options you have, meaning that you may be able to take on a larger or riskier loan than you would regularly qualify for. Often, this means you can buy a home earlier, and start building up its equity without having to save up the full 20% of the home’s purchase price before doing so.

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LTV: Loan to Value Ratio in Regards to Home Loans?

A loan-to-value (LTV) ratio is the ratio of a loan amount to the value of the asset it’s being used to purchase. Lenders often refer to a borrower’s LTV in order to assess the risk involved in entering a loan agreement with that borrower. The higher your LTV, the riskier the loan is for the lender. Generally speaking, LTVs of 80% and up are considered high. 

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How Do You Get Out of a Reverse Mortgage? Can You Sell Your House?

If you have a reverse mortgage, you can sell your home and repay the loan at any time without penalty. Upon selling the home, the loan must be repaid in full and the borrower can pocket whatever equity is left, assuming that all other loans, liens and associated fees with the sale of the home are paid.

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What Are the Closing Costs on a Reverse Mortgage?

The closing costs for a reverse mortgage are dependent on the type of reverse mortgage loan chosen, the lender chosen and the money taken out upfront. Here, find a list and brief explanation of typical fees at closing.

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What Is the Downside of a Reverse Mortgage?

Depending on your personal circumstances, there may be some downsides to a reverse mortgage. It's important to fully understand the terms of your reverse mortgage loan before closing, so here are the drawbacks of this type of home loan.

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How Does a Reverse Mortgage Work?

A reverse mortgage is when a lender takes the equity in your home and converts it into payments to you. Equity in your home is defined as the difference between what your home is valued and the debt owed on the home.

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What Is a Jumbo Home Loan or Jumbo Mortgage?

A jumbo home loan, or jumbo mortgage, is a type of non-conforming conventional loan. This means it’s a loan that isn’t backed by FHA, it has nothing to do with VA or USDA, and neither Fannie Mae nor Freddie Mac will buy it. It makes a person wonder why a bank would even deal in these, but the truth is that they’re reasonably low risk and very high profit from the lender's perspective. 

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Is There a Difference Between PMI and MIP?

While private mortgage insurance (PMI) generally exists to protect lenders for all types of home loans, MIP specifically protects FHA government-backed loans.A MIP (Mortgage Insurance Premium) protects the lender regardless of the amount of the down payment.

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How Can I Avoid Paying Private Mortgage Insurance (PMI)?

There are a few options when looking to avoid paying private mortgage insurance on your conventional loan. Private mortgage insurance is tacked on to a conventional loan when less than 20% down payment is paid.

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What Is the Federal Housing Administration (FHA)?

The Federal Housing Administration (FHA) is a branch of the U.S. Department of Housing and Urban Development (HUD) that insures private loans for buying and repairing homes. The FHA insures loans made by private lenders to borrowers who’d normally have a hard time getting favorable loans.

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Who Can Qualify for an FHA Loan?

FHA loans are federally backed home loans that are meant to encourage home ownership. They are really accessible because they are federally backed, so lenders do not mind taking on the risk. The FHA has guidelines on who may qualify for an FHA loan, but you should be aware that lenders often add their own standards.

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What is a Good Down Payment on a House?

A good down payment on a house largely depends on your circumstances and the loan you've applied for. Based on loan requirements and your risk profile the lender will determine the minimum down payment for the loan. In other words, it may not be up to you how much you pay -- though generally, a higher down payment will equate to lower fees and better loan terms.

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The Beginning of the Home Buying Process

Before making a decision on the house to buy you have to take a practical and introspective look at your financial standing, your budget, and your aspirations. Before the work of looking for a loan and the house to buy begins, it is important that you have an understanding of your needs and means.

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What Kind of Credit Score Do You Need to Get a Home Loan?

Your credit score is an important measure of your financial stability and health. It's at the core of any loan or line of credit, including home loans. A credit score not only determines your loan approval but the terms of the loan, too.

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The Different Types of Mortgages

There are many different mortgage options for homebuyers to choose from. For starters, mortgages are usually categorized as either a fixed rate or adjustable rate. Then there are various loan programs to choose from including FHA Loans, VA Loans, USDA Loans, or Conventional Loans

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Criteria for First-Time Home Buyers for Home Loans

To help first-time home buyers, federal, state and local housing agencies have programs to make the home buying process easier and cheaper. The agencies and lenders in your area can offer you various FHA loans, VA loans, down payment grants, and other programs to make it easier to qualify and buy your first home. The definition of a first time home buyer

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Variable-Rate Mortgage

A variable-rate mortgage is a loan with a variable (changing) interest rate. It’s also known as an adjustable-rate mortgage (ARM) or a tracker mortgage. The interest rate varies according to an underlying index like LIBOR, treasury bills, or the federal funds rates.

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What is a Fixed-Rate Mortgage?

A fixed-rate mortgage is the simplest and most common mortgage for homebuyers. It simply has a fixed interest rate, that does not go up or down, throughout its lifespan. Since it never changes, a fixed-interest-rate mortgage isn't associated with indexes, margins, floors, or caps. As the interest rate is fixed, the monthly principal and interest payment are the same throughout the mortgage’s lifespan.

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How to Calculate a Fixed Mortgage Rate

Calculating a fixed mortgage rate is relatively simple: You take the annual figure and turn it into a monthly figure. To calculate the monthly fixed mortgage rate, just do the following steps:

  1. change the annual rate to a decimal number by dividing it by 100;

  2. take the resulting decimal figure and further divide it by 12; and

  3. voila!, You have the monthly fixed mortgage rate.

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Home Loans for First-Time Home Buyers

Buying your first home is a challenging but important first step in securing your future. There are many financial products available on the market for first-time homebuyers. Each product has its target market, so it’s important to understand your needs so as to match them to the products on offer.

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Home Loan Down Payment Assistance Programs

Yes. These programs assist with providing funds for down payment, closing costs, prepaids, principal reductions, and/or repairs. How much you get depends on whether you qualify, the area median income, and home prices.

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How FHA Home Loans Work

A Federal Housing Administration (FHA) loan is a loan with less stringent qualifications and low down payments. It’s part of the U.S. Department of Housing and Urban Development’s programs to help first-time homebuyers buy a home.

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First-Time Home Buyer Down Payments

Regular loans usually require a 20% down payment on a home. First-time homebuyer programs like the FHA loan reduce this to as low as 3.5%.

The amount can vary according to the program on offer and to what extent you qualify for the grant.

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Applying for a Federal Housing Administration (FHA) loan

Like with most housing assistance programs, you can start at your local housing agency. You’ll be provided with a breakdown of the FHA loan-approved lenders in your area, whom you can apply to. If you qualify for the program, simply apply to these lenders. If you get more than one quote, you’re more likely to find a better deal.

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Amortized Loans with Regard to Home Loans

An amortized loan is a debt that’s paid off over time in equal installments. Each payment pays off the interest and the principal.

In the beginning, the installments prioritize paying off the interest and a portion of the principal. Over time, the interest will become a small part of the installment, as the principal will have become a larger component. 

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How to Get a Home Loan

Financing your home is a large investment, which is why most people need long-term loans to buy a home. Before searching for a home to buy or financing options, first get a good idea of your financial standing. Buying a home is a huge financial obligation, so ensure that:

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Variable Interest Rates in Relation to Home Loans

A variable interest rate is one that can go up or down based on an index. A variable interest comprises an index rate and a margin rate.

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FHA 7 year ARM: Federal Housing Administration 7 Year Adjustable Rate Mortgage

The FHA 7 year ARM is a hybrid mortgage that is guaranteed by the Federal Housing Authority. It is deemed a “hybrid” mortgage because it has a fixed interest rate in the beginning for 7 years and then switches to a variable interest rate. As with all adjustable rate mortgages (ARMS) the rate is composed of an index rate and the lender's margins.

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7/1 ARM: 7/1 Adjustable Rate Mortgage

The 7/1 ARM is a hybrid mortgage, it comprises years with a fixed interest rate followed by years with a variable rate. The “7” is the number of years with a fixed interest rate, the “1” represents the annual adjustment period.

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Home Equity Loans (HEL) vs Home Equity Line of Credit (HELOC)

The interest on both HELs and HELOCs are lower than credit card rates as they are secured by your home, which makes them an attractive source of funds. The main differences between the home equity loans and home equity lines of credit are:

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HELOC: Home Equity Line Of Credit

A home equity line of credit (HELOC), is a pool of credit you can draw from using your home equity as collateral. Your home equity is the difference between the value of your home and the mortgage balance. So if your home is valued at $250,000 and your mortgage is $150,000 then your home equity is at $100,000 ($250,000-$150,000).  

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Home Equity in Relation to Home Loans

Home equity is value built up from paying down the mortgage of a home while it appreciates in price. It is the difference between the market price of a home and the debt attached to it like a mortgage. Home equity is the portion of your home that you actually own.

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Qualifications for Home Equity Loans

A home equity loan is a second mortgage. It uses the equity in your home as security for a loan. The low-interest rate and substantial loan amount make it an attractive source of funding for various needs. To qualify for a home equity loan generally requires you to have the following:

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Cash Out Refinance in Relation to Home Loans

A cash out refinance uses your home equity to issue a new loan to replace the old one and give you a cash payout. Say your home is valued at $400,000 and your mortgage stands at $250,000 which means that your home equity is $150,000 ($400,000-$250,000). Using your home equity as collateral you can take out a new loan of $320,000, which will cover the $250,000 mortgage and get a cash payment of $70,000 ($320,000-$250,000).

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Finding Home Equity Loans With Bad Credit

Home equity loans are more reliant on your home equity as security rather than on your credit score. So if you have equity in your home and bad credit you may still qualify for a home equity loan.You can get home equity loans from a vast number of lenders in the market.

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Accessing Your Home Equity

There are several ways you can access your home equity such as selling your home, doing a cash out refinance, taking out a home equity loan, or opening a home equity line of credit. Turn the equity in your home into a source of cash to use as you see fit.

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Uses For A Home Equity Loan

Whenever a large expense comes up, home equity loans are a very tempting source of funds. You can pretty much use a home equity loan for whatever you like, which is what can make it perilous for people with no control over their spending habits.

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Calculating the Value of a Home Equity Line of Credit (HELOC)

The value of a home equity line of credit (HELOC) is determined by the home equity and the lenders acceptable level of combined loan to value (CLTV). The home equity has to be large enough to cover the requested loan, and the CLTV has to be at a sustainable level

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Buying A Home With No Down Payment

Yes, it is possible to buy a home with no money down or down payment. There are a variety of loans in the market that cater to home buyers with different needs. To qualify for a no money down home loan you will need to have a good credit score and credit record

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Adjustable Rate Mortgages

An adjustable-rate mortgage (ARM), also known as a variable-rate mortgage or tracker mortgage, is a loan with an interest rate that can go either up or down depending on market conditions. These market conditions are based on an underlying index like the federal funds rate, treasury bills, or LIBOR.

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A Complete Guide to Balloon Mortgages

Balloon loans are usually short-term and only a small portion of the principal will be paid by the end of the term. They look something like this, a $400,000 loan is to be amortized over 30 years but due in 5 years. The borrower will make payments like they are on a 30-year amortized payment plan, but the loan will be due in 5 years. The amortized payments will pay for mostly interest and a small portion of the principle, the balloon payment is likely to be close to the principal.

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Conventional Home Loans

A conventional loan is a loan that is not insured or guaranteed by the government. A conventional loan may be a fixed rate mortgage, variable rate mortgage or a hybrid ARM. Conventional loans are either conforming or non-conforming loans.

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Applying for a First Time Home Buyers Grant

First time home buyer grants are issued by federal, state and local housing agencies to help borrowers purchase a home easily. The programs are designed to lower the hurdles of acquiring a home,  by paying the down payment.

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FHA 5/1 ARM: Federal Housing Administration 5/1 Adjustable Rate Mortgage

A 5-year ARM FHA mortgage is a loan with a fixed and variable interest rate that is guaranteed by the Federal Housing Authority (FHA). The loan is a hybrid adjustable-rate mortgage (ARM): it starts out with a fixed interest rate for the first five years, then the rate becomes variable. The loan comes with a guarantee to the lender that the FHA will pay it off if the borrower fails to pay.

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How Payments On A Fixed Rate Mortgage Can Increase

A fixed rate mortgage has a fixed term, fixed rate and is popular for its simplicity. The interest rate is fixed but the payment amount may change over time. This is because the payment amount includes interest and principal payment (which don’t change) along with taxes and insurance payments both of which may change

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