Tag archive for ‘home financing’

These 4 Mortgage Myths are Nothing More than Myths

by Admin - on Oct 11th 2016 - Comments Off on These 4 Mortgage Myths are Nothing More than Myths

Mortgage in RivertonWhen it comes to financing your dream home, making wrong assumptions could actually hamper your ability to purchase the right property, warns an expert from The Mortgage Partner Inc. Sadly, there’s a chockfull of mortgage myths online that plenty of homebuyers actually believe. Below are 4 of the most common.

Mortgage Myth #1: The Best Option is Always the One that comes with the Lowest Mortgage Rate

Although the interest rate is crucial since it directly affects your monthly payment amount, you should know that there are more fees that could significantly differ from one offer to another. For example, the origination fee for covering paperwork and processing could differ between .5% and 1.5% depending on the lender. To ensure that you choose the best mortgage rate, a loan officer from Provo recommends that you consult with different lenders and request for a detailed list of all the costs related to the mortgage offer.

Mortgage Myth #2: You Have to Pay a 20% Down Payment

While this is an ideal number since you’ll owe less money because of the significant down payment, not all mortgage programs will require you to put down 20%. With the FHA loans, for example, you could opt to put down as little as 3.5% down payment, considering that you have a credit score of at least 580. Even borrowers with credit scores between 579 and 500 could qualify if they could make a 10% at the least.

Mortgage Myth #3: ARMs are Only for the Risk Takers

An adjustable rate mortgage or ARM could be a sensible option for some borrowers. For example, an ARM is great for borrowers who plan to relocate within five years since your rate won’t start to adjust until you’ve already moved. Within that timeframe, you will have saved more interest since interest rates on ARMs are usually lower than fixed rate mortgages.

Mortgage Myth #4: Preapproval and Prequalification are One and the Same

Simply not true. Essentially, prequalification means that you’ve already talked with a lender. Preapproval, on the other hand, indicates that your lender already has your paperwork, packaged the loan, and submitted your application to the underwriter for evaluation. While your application will still have to pass formal underwriting so you could purchase the property, your lender will have given you a formal letter detailing your preapproval status for a specific amount.

Now that you know that these mortgage myths are really nothing more than myths, go ahead and shop around for the best mortgage offer available to you.

Understanding the Differences Between Conforming and Nonconforming Loans

by Admin - on Nov 19th 2015 - Comments Off on Understanding the Differences Between Conforming and Nonconforming Loans

home financingThere is indeed no place like home. Finding your dream house may not be hard, but owning one is never easy. Usually, the reason is not having enough savings to pay for a new house. This circumstance is probably the motivation on how mortgage was developed.

Say you already found a lender or a broker; the next step is to check what type of loan you will get. If conforming and non-conforming loans are vague knowledge to you, take time to learn their basics so that you will be rightfully led to the one you want to take advantage of.

Conforming Loans

Conforming loans are mortgages that meet the guidelines set by home loan market drivers, Fannie Mae and Freddie Mac. The most critical condition for a loan to be considered conforming is the size. The Federal Housing Finance Agency (FHFA) fixed the limit or the maximum size of a conforming loan at $417,000. Loans below that figure are conforming fixed and anything above that are considered non-conforming. In areas with greater demand for housing, limits may be higher.

Nonconforming Loans

If you are buying a luxury primary residence, you might need a jumbo loan or a non-conforming loan. This type of mortgage exceeds the set loan limit. But, borrowers who take out mortgages below the limit can still be disqualified from getting a conforming loan when other guidelines are not met such as:

Low credit score or poor credit history
Bankruptcy within the previous two years
High debt with respect to income
Documentation Issues

For Borrowers and Lenders

Conforming loans are appealing for most borrowers because they are paired with lower interest rates and fees. Furthermore, lenders find conforming loans attractive because they can put these types of mortgage on the secondary market, free up capital, and then provide more loans. On the contrary, jumbo loans are hard to sell. As less funds become available, fewer loans are offered too. Lending companies offset this financial risk by charging the borrowers higher interest rates and greater fees and insurance requirements.

Getting a mortgage is a sensible way of fulfilling your dream to own a new home. Both conforming and non-conforming loans may be decent, but choosing one that fits your needs is a surefire measure not to mess up with your dues until the entire loan is settled.