Discover Why Conventional Home Loans May Be the Best Option

Have you been trying to figure out which home loan is right for you? Well, if you have good credit, and have taken the time to save for buying a home, then a conventional home loan may be the best option. The main benefit is a conventional home loan will save you money.

The main advantages of FHA home loans and other government-backed mortgages include (1) the qualifying credit criteria is lower, (2) the amount of your required down payment is less, and (3) refinancing is easier. However, these benefits have a cost. You can end up spending much more, both with your monthly payment and over the life of the loan.

Down Payment

FHA home loans require as little as 3.5 percent as the down payment. Of course, the lower down payment means more of the sale price is financed. Your monthly mortgage payment is higher, affecting your payment-to-income ratio and loan approval. The higher financed amount also means paying thousands more in interest over the life of the loan.

Private Mortgage Insurance

When you place 20 percent or more down on a home, you are not required to pay for mortgage insurance. This insurance reimburses a financial institution if the home goes into foreclosure. The premium is added to your monthly mortgage payment, also affecting your payment-to-income ratio.

Mortgage Rates

Since FHA and other government-backed mortgages have lower credit standards, there is a greater financial risk for banks and mortgage companies.  This translates into higher interest rates. Since conventional home loans have higher credit standards, they offer better rates.

More Options

Conventional home loans provide more flexibility with payment terms. FHA home loans have either 15-year or 30-year terms (some lenders can be more flexible). Conventional loans have options that can help you pay your mortgage off earlier and save thousands in interest.

If you would like to talk more about why a conventional home loan may be the best option, or need more information, please contact us.


Do You Qualify for a Jumbo Loan?

In most areas, conventional loans are limited to just over $400.000. Of course in certain, more expensive, residential areas, those amounts may be higher, sometimes even up to around $700,000. But what if the home of your dreams is currently selling for well over what a conventional loan in your area will offer?

The answer is that you need a jumbo loan. Of course the next question is do you qualify for one? According to bankrate.com, there are three main qualification areas that will answer that question.

Qualification #1: Can you afford at least 20% down payment on the home? Just a few years ago this requirement was only 5% in some cases, but things have changed. A credit squeeze that started in late 2007 frightened some lenders away from jumbo loans entirely. Now they are back, but they are looking for clients that can put a substantial amount down to lessen their risk.

Qualification #2: You must be able to fully document your income. They want cold, hard proof that your annual income is exactly what you say it is.

Qualification #3: If you get the loan, will the monthly mortgage payments be less than 38% of your monthly income before taxes? If yes, then you should be in good standing. Of course the smaller percentage of your income that will be needed for the mortgage the better.

If you think about it, all of these qualifications make sense. No lender wants to lend money that they don’t fully expect to get back–with interest. Meeting these three requirements goes a long way in helping a lender feel comfortable with agreeing to your jumbo loan.

One note, though, is that you shouldn’t expect to get a fixed rate loan for these higher-end amounts. Adjustable-rate loans are common for this market. The good news is that the interest rate can be relatively low for these loans.

Need more information? Please contact us and we will answer any questions you may have about your loan options.


House Hunters: How Will an Increase in Mortgage Rates Affect Your Bottom Line?

The Federal Reserve Board has been talking about interest rates a lot lately, and has made it clear that an increase will probably happen soon. Back in September, the real estate community breathed a collective sigh of relief when they thought it would be approved, and they decided to wait. But the Federal Reserve was clear that it would be brought up again before the end of the calendar year. People who are currently searching for homes to buy know that mortgage rates will make a difference in their budgets, so it is important to know what to expect.

If mortgage rates increase, then obviously homeowners will either have to pay more each month for a home, or decide on a lower-priced house. Because the rates haven’t been increased in a while, it is expected that the change will be small, and then they will assess the change in the economy.

For a home that costs $200,000, the monthly payment on a 30-year loan with a 4% interest rate is $955. Should the mortgage rates increase to 4.5%, then that payment jumps to $1013, and a 5% rate translates to $1074 each month. House hunters will need to decide if they are willing to pay more each month, or if they need to search for homes in a lower price bracket.

In addition to monthly payments, the increased rate will change how much interest is paid over the life of the loan. Just a half of a percentage point equates to tens of thousands of dollars in interest over 30 years for most mortgages.

The Federal Reserve Board is scheduled to meet on December 6, 2015. October’s employment reports were strong, with good job creation numbers, and lower unemployment. As a result, it’s safe to say that interest rates will probably increase after that meeting. For home buyers who want to take advantage of lower rates, lock in a rate now and get serious about choosing a home.

For assistance in finding the right mortgage for your situation, contact us.


The benefits of using mortgage brokers!

You may be wondering if there are any benefits that are inherent in working with mortgage brokers, and we’re here to assure you that there are, indeed, benefits of working with brokers. Here, then, is the list of benefits you will receive when you work with a mortgage broker:

  • It will save you time and effort. You don’t have the time in the day to go searching for the best deal on your mortgage — and it definitely takes a long time to find the perfect deal. But that’s all the mortgage broker does, and will ever do: find the perfect deal on your mortgage. By hiring a mortgage broker to handle this important part of the home-buying process, you will be saving time and effort.
  • Mortgage brokers already have contacts and relationships in the banking industry that put them at a distinct advantage over non-professionals. These relationships will be suited to your needs — for instance, if you have poor credit, you will need one kind of mortgage broker; if this is your first time buying a home, you will need another kind of mortgage broker.
  • Finally, your mortgage broker will be able to streamline your application materials into one package. If you were to fill out a new application for each mortgage you were looking to apply for, you would waste time and energy and money in the process.

We are a committed team, here to help you find the right mortgage rate for your needs. We understand that every borrower is different, and we offer a variety of services to meet your individual requirements. For more information about us and our services, contact us today to see what we can do for you.

What does a mortgage broker do?