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| Which Program Is Right For You? |
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Matching your financing needs to the hundreds of loan programs available to you may seem like an impossible task. Having so many loans to choose from is a double edged sword; yes you have plenty to choose from but making a choice among one of them may seem like picking a needle out of haystack. In this section we will try to help you find that needle and help you make a choice that you can live with for years to come. What's the difference between a "conventional" loan and an FHA loan well here's the basics: Conventional - Conventional loans are those which are offered under the guidelines of two quasi-governmental agencies, Fannie Mae (FNMA) and Freddie Mac (FHLMC). Conventional loans are also those that are offered by savings and loans under their own guidelines, usually for loans that exceed FNMA/FHLMC guidelines for dollar loan limits; these are known as jumbo loans. In addition, private mortgage companies insure loans that have lower down payment requirements. Click here to see our conventional loan programs FHA Loans - These loans are made by financial institutions with mortgage insurance provided by HUD (The Housing and Urban Development Department). This allows these banks to make loans with small down payment requirements and relaxed qualification guidelines. In return, borrowers make a small insurance premium payment to HUD every month. VA Loans - These loans are very similar to FHA loans in that they are guaranteed by the Federal government and they have relaxed qualification and down payment standards. However, these loans are only available to veterans and other qualified military personnel. Jumbo loans are those that exceed the lending limit guidelines of both Fannie Mae and Freddie Mac. The guidelines of these loans can vary from institution to institution. The rates on these loans are also slightly higher than conventional loans. Click here to see our jumbo programs The difference between these two types of loans is obvious: fixed rate loans are just that, the interest rate on the loan remains constant throughout the life of the loan. On the other hand, an adjustable rate loan will have periodic adjustments in the interest rate to adjust to market conditions. Fixed rate loans are great if you want to know what your payment is going to be six, ten and fifteen years from now. On the other hand, adjustables come with lower starting interest rates, which means you can qualify for more home. Adjustables can take many different forms, however there are four different factors that determine what kind of adjustable it is: Starting Rate - This is the initial rate that your loan will start at. This rate is usually the lowest that it will ever be for the life of the loan. Index - This is the base rate that the lender uses to determine your rate. Some common indicies are the LIBOR and 11th district Cost of Funds. These rates change with market conditions. Margin - This is the constant percentage above the margin that the lender sets to ultimately determine your rate. Adjustment Period - This the amount of time between each rate adjustment, usually three to twelve months. Click here to see our conventional adjustable rate programs These loans are very similar in that they both offer lower rates than most conventional fixed rate loans. However, they differ in one very important aspect, one, the balloon payment loan, must be paid off within a specific period of time (five to seven years) that is shorter than the amortization period (usually 30 years). The Quasi-Fixed rate loan is fixed for a certain number of years (again, five to seven) and then adjusts to a new rate for the remaining life of the loan. These loans can be great for borrowers who are not planning on staying in a home for more than five to seven years. |
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