Finding the Right Loan: Buying and Refinancing

WHERE SHOULD I START?

Start with Advisors Mortgage.  Here is their advice on finding the right loan.

It is hard to know where to begin! There are so many options that it can be very confusing to find the right type of loan to suit your individual needs. You must first ask yourself many questions:

• How much can I afford to pay each month?
• Do I plan on keeping this property for only a few years or for a long period of time?
• Is a small payment a higher priority than paying the loan down quickly?
• Am I able to make a down payment?
• Over how many years do I want to pay a mortgage?
• Am I trying to find a mortgage or refinance an existing mortgage?
• Is my income stable? Will it be rising in the future?

The answer to these questions will help you know which loan will be best for you. Of course, we will guide you as to which program best suits your needs. However, there are a wide variety of loan options, so it will be useful to know some basic information.

• The larger the down payment, the better your options are for payment size, interest rate, and length of time to pay back the loan.
• A fixed interest rate will tend to be higher than an adjustable rate.
• The longer the term of payback, the smaller the payment will be.
• The smaller your payment, the larger the amount will be paid in interest.
• The more that you pay to interest, the slower that you are building equity.

It is also useful to understand the essential differences in types of loans. There are really only three basic types of loans:

• Fixed Interest Mortgages (FRM)
• Adjustable Rate Mortgages (ARM)
• A Hybrid (some combination of the two)

Loans are also classified as either government loans or conventional loans. Government loans such as FHA and VA have differing qualifications and parameters.

WHAT IS A CONVENTIONAL LOAN?

Conventional loans are broken down into either conforming or non-conforming loans. To qualify as a conforming loan (or an A paper loan), it must fall under the guidelines established by Fannie Mae and Freddie Mac, corporations that have established industry standards and guidelines that govern credit requirements, down payment amounts, and maximum loan amounts. Borrowers that do not meet those requirements due to flawed credit can often still obtain a non-conforming loan (B, C, or D paper loans).  Your loan options can be limited by poor credit. A credit score is a system of points earned based on your credit history. This three-digit number (ranging from 300 to 900) is influenced by such factors, among others, as:

• Late payments
• Debt-to-credit ratio
• Total debt amount
• Age of accounts (the older the better)

There are three major credit bureaus (Experian, Equifax and TransUnion) that produce comparable credit scores using some version of FICO, the industry standard developed originally by Fair Isaac and Company. Because this credit scoring model is used by most lenders to determine your qualifications for a loan, you may want to see what you can do to increase your credit score before applying for a mortgage.  

• Construction-to-permanent: You borrow to pay for construction. When you move in, the lender converts the loan balance into a permanent mortgage. It’s two loans in one.
• You have one closing with a construction-to-permanent loan which reduces the fees you pay.
• Stand-alone construction: Your first loan pays for construction. When you move in, you get a mortgage to pay off the construction debt. It’s two separate loans.

You pay interest only on the outstanding balance. The interest rate is variable during construction, moving up or down with the prime rate. If the Federal Reserve raises or decreases short-term interest rates while the house is being built, your interest rate will change.

The lender converts the construction loan into a permanent mortgage after the contractor finishes building the home. The permanent mortgage is like any other mortgage. You can choose a fixed-rate or an adjustable-rate loan and specify the loan’s term, typically 15 or 30 years. When you’re ready, shop and compare mortgage rates.

Many lenders let you lock a maximum mortgage rate when construction begins. Lenders generally require a down payment of at least 20 percent of the expected amount of the permanent mortgage. Some lenders make exceptions.

Stand Alone Construction
Stand-alone construction loan can work out well if it allows you to make a smaller down payment. That can be a major advantage if you already own a home and don’t have much cash for a down payment but you will have more cash after you sell your home. You can live in your current home while your next home is under construction.

This type of loan has drawbacks, though:

You pay for two closings and two sets of fees — first, on the construction loan; second, on the permanent mortgage.

• You can’t lock a maximum mortgage rate. If rates rise during construction, you might have to pay a higher-than-expected interest rate on the permanent loan.

And if your financial circumstances change for the worse during construction, you may find it difficult or impossible to qualify for a mortgage.

Qualifying for a Construction Loan is Harder 

When you apply for a loan to build a home, the lender doesn’t have a complete home as collateral, so qualifying for a loan can be more difficult. The lender will want details about the home’s size, the materials used and the contractors and subcontractors who do the work. The general contractor can pull all this information together.

On top of that, the lender needs to know that you can make your monthly loan payments during construction. If the lender thinks you can’t make your current rent or mortgage payments while your house is being built, you won’t qualify.

Adequate savings for unexpected costs a must
The lender will make sure you have savings to pay for unexpected costs. There are always cost overruns when you are building a home that you may not know about until you are into it. We don’t want you to use every last dime before you start. Cost overruns are incurred when borrowers change their minds about what they want as construction proceeds.

You're looking for a new home, but you don't want to strap yourself when you're desire is to furnish your home to the max.  You can go conventional or FHA.  Whether you are a first-time homebuyer, moving to a new home, or want to refinance your existing conventional or FHA mortgage, the FHA loan program will let you purchase a home with a low down payment and flexible guidelines. Currently the down payment with FHA is only 3.5% of the value of the home.

FHA Limits 

FHA loan limits were established to define how much you can borrow for a HUD-backed mortgage. Each state has different limits, so be sure to look up your state to understand what is available for your FHA home loan.

Down Payment Grants for FHA Loans

Paying the upfront costs of buying a new home can be challenging. To help overcome this hurdle, many local and state agencies offer down payment assistance in the form of grants or second mortgages.  So FHA or conventional, it's all up to you.  Give us call so we can determine which works best for you!

ABOUT US - WHO IS ADVISORS MORTGAGE?
The keys to your future are often your new home. But we truly feel the keys to your home are those inside--- those you love that are the true keys to your life. Let us help you find a home or refinance an existing one with a great mortgage that will reward you and those you love with many years of enjoyment. Whether you are looking for a new home or moving from one home to another, you have an expert lender, Advisors Mortgage, with an A+ Better Business rating here to help you. 

Advisors Mortgage Group has  branch offices up and down the East Coast and across the United States. Its corporate office located in Ocean Township, NJ has established itself as a pillar of excellence in the mortgage industry. Our immense experience is our greatest asset and is the foundation of the success of the company and every Advisors branch and loan officer.

FULL EAGLE FHA UNDERWRITER
In 2005, Advisors Mortgage Group was designated by the Federal Housing Authority as a Full Eagle FHA Underwriter. As a Full Eagle, Advisors has been able to expand its loan volume by approving loans which a majority of the competition could not even dream of. We have built a platform for a seamless and stress-free mortgage process for all of our customers, and we have that same mission throughout all of our offices. We understand that success cannot be attained without teamwork and communication, two of our most important strengths.  So if you are looking to apply for a new loan, refinance an existing loan, have questions or require assistance, call Advisors Mortgage: 888-843-9797 -- 804-9044 and we will be only too happy to help.