Types of Available Loans
We have a wide variety of refinancing and purchase options available to meet your specific needs. As a mortgage broker, we have established relationships with numerous lenders, and we work for you to make your loan process stress free and simple.
Purchase Loans (mortgages)
Usually Real Estate buyers provide a down payment towards the purchase price, and the balance of the funds is covered in a purchase loan, or mortgage.
As a broker, we will review your personal information such as credit history, income and available down payment. Using automated underwriting programs, we will determine the risk grade assigned to you by each lender. This will determine your interest rate. This method allows us to compare each lender’s programs and rates to get the best mortgage for you.
Some loan programs exist where no down payment is needed, or some will allow additional co-signers to help qualify for a loan. When shopping for your next purchase loan, make sure your mortgage broker has the necessary experience to find you the right mortgage for your needs.
Contact us to schedule an appointment for a free consulation to review all the options that today’s market has available for first time buyers, buyers of second homes, investment homes, home upgrades and empty nesters.
Refinance Loans
If you are already a homeowner, there are two main types of refinance products available, a Rate and Term Refinance or a Cash Out Refinance.
A Rate and Term Refinance is used when a borrower wants to refinance the amount of their present mortgage and closing costs, ultimately reducing their monthly payment or length of their loan. This type of mortgage has very little risk and often will allow the borrower to qualify for the best rates available.
A Cash Out Refinance allows the borrower to take equity (cash), out of their house to pay bills, invest, renovate their property, or many other circumstances. There is a limit to the amount of cash that can be taken out, based on the equity available. If the borrower goes above these lending limits, there will be a higher risk to the lender, and consequently a higher interest rate.
Many times homeowners interested in refinancing will only look at advertised rates without a clear understanding how their credit history, income, loan to value, or equity position can help them qualify for a better loan. We will review all of these factors and quote you the best possible rate based on your specific information.
Home Equity Loans, Home Equity Line of Credit (HELOC)
Home Equity loans are used to borrow money against the equity in your home for the purpose of home improvements, etc. Usually there are low closing costs or no closing costs associated with this type of loan. Typically, a home equity loan is placed behind a larger first mortgage, but you do not need to have a mortgage on your property.
A home equity loan is a revolving line of credit that is attached to your house as collateral. This line of credit is like a checking account that allows you to draw up to the maximum approved amount. During this a pre-determined period (typically 10 years), you have the option to make a payment of interest only and/or any amount above the interest only payment to reduce your outstanding balance. Once that period is over, the loan will either have to be paid off or converted into a fixed fully amortized loan for the remaining years left on the note.
Most home equity loan rates are adjustable and are tied to the prime rate, plus or minus a certain cost factor to determine your interest rate. This means that your monthly payment can go up or down depending on the fluctuations of the prime rate.
Construction Loans
Construction loans allow the borrower to acquire a vacant parcel of land that is ready for development to build a house. These loans can also be used for new homeowners to purchase a house that is in need of repair, or for existing home owners looking to renovate their present house.
A construction loan is not meant to be long term. This ensures the builders are paid in a timely manner, advancing funds in accordance to a schedule based on the progress of the construction of the house. Once the certificate of occupancy is given, the construction loan is due, and the loan is then converted to a permanent mortgage. The construction loan and the mortgage loan are completed together with just one application and closing.
These types of loans are extremely time consuming. The lender has to review the builder as well as all costs associated with the construction and plans for your proposed house. The rates for a construction loan are typically variable rates, tied to the prime rate. However, depending on trends, you may want to purchase a rate lock agreement. A knowledgeable mortgage broker with construction experience can help you with these complicated choices, making your project a success.
Conventional/Conforming Loans
Every year the federal government through its lending arms, (Fannie Mae and Freddie Mac), will determine the maximum loan amounts that meet the requirements of a conventional or conforming loan. These loans meet strict guidelines that allow them to be pooled into large funds that have very little risk and are easy to sell to investors. Both Fannie Mae and Freddie Mac have their own automated underwriting engines that determine the risk based on income, assets, and equity in the property that you are buying or refinancing. This risk allows the lenders to price out an interest rate and cost to the potential borrower(s). Typically these automated decisions can be completed instantly after all accurate data is entered into the system.
Non-Conforming Loans
These loans consist of all the other loan products that do not meet the pooling and risk requirements of conventional loans. Because there is a higher risk associated with this type of loan, there will be a higher interest rate to compensate the risk. Typical loan types would include, but are not limited to the following:
- No Income Loan
- Stated Income Loan
- No Documentation Loan
- Bank Statement Loan
- Construction Loan
- Limited Documentation Loan
- And many other variations
FHA/HUD Loans
The Federal Housing Administration, generally known as FHA, provides mortgage insurance on loans made by FHA-Approved lenders. The FHA does not make home loans; they insure the FHA loans that we can assist in getting you. FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. An FHA loan differs from the Conventional loan in the following areas:
- Income – FHA loans allow additional non-owner occupying co-borrowers to be on the application to assist the buyers in qualifying for the loan.
- Assets – Do not have to come from the borrowers own funds. These funds can be a gift from a family member.
- Equity – FHA loans can be as high as 97% of the purchase price and 95% for refinancing, both have no additional cost to the borrowers.
- Credit – Poor credit history in the past or not having any credit scores will not prohibit a potential borrower from getting an FHA loan. Each file is manually underwritten. FHA underwriters look at many other factors outside of just credit.
- Seller Concessions – Sellers are able to contribute up to 6 percent of the mortgage amount up to a maximum loan amount of 103% of the purchase price.
- Assume-ability - FHA loans can be assumed by another borrower as long as they meet the FHA lending requirements. This is a great asset when current interest rates are higher than the rate on the seller’s assumable mortgage note.
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