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What Types Of Mortgage Loans Are Available?

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This video tells you about the most common types: Fixed Rate, ARM, Balloon and 2-Step.

First, Fixed Rate Mortgages: Payments remain the same for the life of the loan generally 15 years or 30 years. Interest rates remain the same, so payments are predictable.

A second common type is an Adjustable Rate Mortgage, or ARM. ARM Payments increase or decrease on a regular schedule with changes in interest rates increases are typically subject to limits.

Third, Balloon Mortgage: These offers very low rates for an Initial period of time usually 5, 7, or 10 years when time has elapsed, the balance is due or refinanced though not automatically.

Finally, a Two-Step Mortgage- Interest rates adjusts only once and remains the same for the life of the loan.

Many other types are available, including government-insured mortgages and VA loans for veterans. Talk to lenders and real estate professionals to assess your situation.

Are There Special Mortgages For First-Time Homebuyers?

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Yes. Like the video shows, lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past.

Lenders may now be able to help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or who have experienced income irregularities.

What Does Ability To Repay Mean?

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What are the “Ability to repay” rules about?

In a nutshell, as this video shows, new laws require lenders to make a good-faith assessment of a borrower’s capacity to pay back their loan over time.

It’s a longer-term view that goes beyond immediate income, debt and credit rating.

These new Federal laws- supervised by the CFPB – require lenders to ask more questions – about income, assets, employment, credit history, and monthly expenses – as they relate to the proposed loan.

For example, a lender offering a mortgage with a low initial rate must try to assess how a borrower will handle the later, higher rate as well.

If you’re applying to borrow ask whether the program you’re considering is a Qualified Mortgage

Ability-to-repay rules are built in to loans that meet Qualified Mortgage guidelines.

 

How Large A Down Payment Do I Need?

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There are mortgage options now available that only require a down payment of 5% or less of the purchase price. You’ll see some pictures in this video to help you remember later – the larger the down payment, the less you have to borrow and the more equity you’ll have.

Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan.

When considering the size of your down payment consider that you’ll also need money for closing costs moving expenses, and – possibly – repairs and decorating.

What Is Loan To Value (LTV) And How Does It Affect The Size Of My Loan?

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While this video simplifies things to help you remember, the loan to value ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing.

Each loan has a specific LTV limit. For example: With a 75% LTV loan on a home priced at $100,000 you could borrow up to $75,000 (75% of $100,000) and would have to pay $25000 as a down payment.

The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV the less cash homebuyers are required to pay out of their own funds.

So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require mortgage insurance policies.


What Is A Qualified Mortgage?

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As this video explains,  Federal laws put into effect in 2014 and  supervised by the Consumer Financial Protection Bureau define lending practices and loan terms for a new category called “Qualified Mortgages.”

They provide stable loan features for consumers and improve legal protection for lenders who follow the guidelines.

These guidelines require lenders to assess each borrower’s ability to repay their mortgage loan.

As of 2014, guidelines require that a borrower’s monthly DEBT – including mortgage – be no higher than 43% of their monthly gross INCOME.

The laws also define unacceptable loan terms:

  • interest-only loans
  • terms over 30 years
  • negative-amortization loans that increase principal over time
  • most balloon loans do not meet the Qualified Mortgage guidelines.

The laws aim to provide consumers with objective guidance  about reasonable debt from the CFPB and in return, to grant lenders who follow that guidance with higher levels of protection from lawsuits.

Ask your lender about Qualified Mortgage options for your home purchase.

 


What Is A Mortgage?

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The original phrase “mort gage” translates as “death pledge”! But as this video explains, a mortgage is a loan obtained to purchase real estate.
The “mortgage” itself is a lien – a legal claim on the home or property that secures the promise to pay the debt.

All mortgages have two features in common: principal and interest.

The principal is the amount you are borrowing which is “secured” by the lender’s claim on the property.

The interest, usually stated as the percentage rate is the additional amount paid for borrowing. Mortgage interest is ‘compounded’ – interest on interest, over time.


What Is A Certificate of Eligibility, or COE?

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What Is A Certificate of Eligibility, or COE?

The COE is the key document that verifies to lenders that someone is eligible for a VA-backed loan.

Servicemembers, Veterans and National Guard and Reserve members may apply online or through their lender; most lenders have access to the system and can verify eligibility IF the VA has records on file.

The VA also maintains a hotline for assistance.

Surviving Spouses can use VA Form 26-1817 to request determination of their eligibility for VA Loan Guarantees.

Your lender may be able to assist with processing or contact the VA for information this video did not address.


What Are The Major Types Of VA Loans?

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What Are The Major Types Of VA Loans?

Major Veterans Affairs loan programs described in this video include:

1) Purchase Loans.

These help eligible parties buy a home at competitive interest rates with little to no down payment and little or no private mortgage insurance.

2) Cash Out Refinance Loans which enable taking cash out of home equity to pay off debt, fund school or make home improvements.

3) Interest Rate Reduction Refinance Loans also called Streamline Refinance Loans can help veterans obtain lower interest by refinancing existing VA loans

Other programs include:

4) Native American Direct Loans to help eligible Native American veterans finance homes on Federal Trust land.

And

5) Adapted Housing Grants to help veterans with service-connected disabilities buy, build or modify a home suited to their disabilities.

Many states offer additional resources to veterans, too.

Talk to your home lender about your situation.


What Are VA Home Loans?

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What Are VA Loans?

As the video says, the name is misleading – they’re not loans FROM the VA.

The VA – short for “US Department of Veterans Affairs” – is the Federal military veteran benefit system.

The VA administers benefits and services for Servicemembers, Veterans their dependents and survivors.

Programs related to home loans are one of their key services.

The VA is not a bank; they do not provide home loans themselves.

But they do guarantee a portion of home loans provided to veterans and other eligible people by banks and mortgage companies.

These guarantees enable lenders to provide more favorable terms.

They are are commonly called “VA Loans”.

They cover buying, building, repairing, retaining and adapting homes for personal occupancy by eligible Veterans and survivors.