Mortgage brokers offer dozens of loan programs to suit a particular borrower's needs. Your loan officer will consider your situation in the following ten areas to determine which types of loan program are available to you.
Will the property be owner occupied?
How long do you intend to live in or own the property?
The amount you intend to borrow.
Your current income and future income potential
Are you self employed?
The amount of personally saved cash available for the purchase
The amount of Gift Funds available from a Family Member
Is the seller willing to carry a second mortgage?
Do you own other real estate?
Location, condition and zoning of property
Your credit history
Other existing debts, such as car payments, student loans and credit cards
Child Support and Alimony being paid or received
Based upon your responses, your loan officer will be able to recommend one or more options to you. The following is a sample selection of a few of the loan programs available.
Conventional Fixed Rate Mortgages are available in terms ranging from 15 years to 30 years. These mortgages are ideal for individuals on a fixed or consistent income, who intend to live in their homes for over ten years. These loans are not assumable when you sell your property. Interest rates vary with the term of the loan and the borrower's credit history. This type of loan offers the most conservative approach to home mortgages.
A special case of the 30 year fixed mortgages is the Community Home Buyer Loan. This loan is specifically targeted to those individuals who do not presently own any real estate. It offers a down payement as low as 3%. Closing costs and prepaid escrows can be paid by the seller, the lender or through a gift. A non-profit organization can also loan the borrower these costs.
A variation of the fixed rate mortgages are those with a balloon option in five or seven years. These loans offer lower rates than the 15 to 30 Year Fixed Rate Loans discussed previously. Payments are made monthly, calculated on the basis of a 30 year mortgage. If the mortgage is still active at the end of the five or seven year term, the outstanding balance comes due in the form of a single payment. Some of these mortgages have the option to renew the loan for the remainder of the thirty year term with an adjustment to the then current fixed interest rates. If you are the type of person who has a history of moving or being transferred every few years, this is an ideal conservative loan for you.
Adjustable Rate Mortgages (ARM) comprise a very broad category of loans. A common thread to all the loans in this group is that the interest rate of the loan will change over the term of the mortgage. The current rate will be based upon a published financial index. The most common indexes are the 6 month Certificate of Deposit (CD), the one year Treasury Bill (T-Bill), the London Inter Bank Offering Rate (LIBOR), and the 11th District Cost of Funds (COFI). Your mortgage interest rate will be recalculated periodically by adding the value of the index to the margin. The margin is fixed for the term of the loan and represents the lenders operating expenses and profit, the index value changes daily in response to market conditions. Other factors to be considered in the ARM category are how frequently your interest rate will change, and the maximum amount it is allowed to change. Many of the loans in this category offer a very low starting rate, often called a "teaser rate". This rate will increase over the term of the loan, even if the underlying index doesn't increase. Some loans offer a three, five, seven or ten year fixed starting rate, then adjust annually during the remainder of the loan. Your loan officer will be happy to explain the many variations to you.
The ARM loan is ideal for those who intend to be in a home for only a few years. Also, for individuals with a high cash flow, who are trying to payoff the entire loan in a minimum number of years, this loan allows more of your monthly payments to be applied to principal instead of interest. A word of warning, if interest rates increase, your payments on these loans will also increase.
If this type of loan is of interest to you, ask your loan officer for specific information on adjustment periods, caps per period, lifetime caps, payment limits, negative amortization options and conversion to a fixed rate loan.
Government Insured Loans, specifically FHA, FmHA and VA loans are offered by some mortgage brokers. These loans are available both as fixed and adjustable rate mortgages. FHA loans are heavily used by first time home buyers; they offer competitive rates for those buyers with a very minimum amount of cash for their purchase. Like all government loans, they require longer to process, have more paperwork, and are subject to a more difficult appraisal process. VA loans are restricted to individuals qualified by military service or other special reason. These loans often offer low or no down payment terms on moderately priced homes.
The new Farm Home Administration (FmHA) guaranteed loans, offer an excellent value for first time home buyers looking for property in a more rural setting. These loans are now available with 100% financing. In the Vancouver area, they are not available west of 182nd Avenue and south of 169th Street (approx). There are no other geographic limitations in Clark County, however, income and property limits apply. Two major limitations are that the amount of land cannot be over 1 acre and that the property must be on a public street. Please call for more details.