A Fixed-Rate Mortgage (FRM) is a type of mortgage that has a fixed interest rate for the entire term of the loan. The benefit of a fixed-rate mortgage is that the homeowner will not have to worry about the loan payment fluctuating with interest rate changes. The monthly mortgage payment will be consistent for the term of the loan. Most of our clients choose this option on a 30 year term.
An adjustable rate mortgage (ARM) is a type of mortgage where the interest rate is paid on the outstanding balance. There is an initial interest rate that is determined and is typically fixed for a period of time. After the fixed period has expired the interest rate paid by the borrower will then be based on a benchmark plus an additional spread which is referred to as an ARM margin. This is a popular options for home buyers that plan on holding onto the property for a shorter period of time due to the initially lower interest rate in the beginning of the loan term.
A VA Loan is a mortgage loan program which is established by the United States Department of Veterans Affairs (VA) to help veterans and their families obtain home financing. The VA does not directly originate VA loans. The Department of Veteran Affairs establishes the rules for those who may possibly qualify. They determine the set of terms for mortgages to be offered and also insure the VA loans against any defaults.
VA Loans are popular with veterans because they offer up to 100% financing on the value of the home. The borrower must provide a certificate of eligibility in order to qualify for a VA loan, which provides the borrower’s record of military service.
A Jumbo Loan is considered a mortgage with a loan amount which exceeds the conforming loan limits which vary by state and county. (Please contact us in order to let you know what the max conforming loan limit is in your desired area). A Jumbo Loan is not eligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac. Because of this, Jumbo Loans are securitized by other institutions other than Fannie Mae or Freddie Mac. Due to the fact that these securities have more credit risk than those issued by Fannie Mae or Freddie Mac, they trade at a yield premium which causes slightly higher interest rates.
An FHA Loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for a small down payment with as little as 3% down. The 3% down payment requirement can come from a gift, which is why FHA loans are the most popular option for first time home buyers.
A Home Improvement Loan also know as the FHA 203(k) loan is intended if you plan to purchase a fixer-upper or need to make improvements to your existing home such as performing upgrades, repairs, remodelelings, or customize to the needs and wants of the borrower. The U.S. Department of Housing and Urban Development (HUD) insures mortgages through Section 203(k) which covers the purchase or refinancing and rehabilitation of a home that is at least a year old. A portion of the loan proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area. The value of the property is determined by either (1) the value of the property before rehabilitation plus the cost of rehabilitation, or (2) 110 percent of the appraised value of the property after rehabilitation, whichever is less.
An Interest-Only Loan is a type of financing where the borrower is only required to pay off the interest that arises from the principal that is borrowed. Due to fact that only the interest being paid off, the interest payments remain considerably constant throughout the loan term of the mortgage. It is important to understand that interest only loans do not last forever which the borrower will eventually need to pay off the principal of the loan at some point.
A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash. The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower. The borrower is not required to pay back the loan until the home is sold or otherwise vacated. As long as the borrower lives in the home he or she is not required to make any monthly payments towards the loan balance. The borrower must remain current on property taxes, homeowners insurance and homeowners association dues (if applicable).
Hard money loan is a type of loan that is secured by real property. Hard money loans are considered loans of “last resort” or short-term bridge loans. These loans are primarily used in real estate transactions, with the lender generally being individuals or companies and not banks.
