When it comes to obtaining a mortgage, everyone has different needs. Watch and learn about the various mortgage products available so you can make an informed decision.
As a homebuyer, you have a choice of different mortgage products to finance your purchase:
Fixed-rate loan: Provides a constant interest rate and monthly principal and interest payment for the life of the loan. Some advantages of fixed-rate loans:
• Easier to budget.
• Offers protection against rising rates.
Adjustable rate loan: The interest rate and monthly payment can fluctuate. Some advantages of adjustable rate loans:
• Typically, interest rates are initially offered at a discount rate.
• In a low-rate environment, an ARM can save significant money over a fixed-rate mortgage.
FHA loan: Mortgage loan that is insured by the Federal Housing Administration (FHA). Some advantages of the FHA loan:
• Lower down payment, typically 3.5%.
• Lower closing costs.
• Easier credit qualifying.
VA loan: Mortgage loan guaranteed by the US Department of Veterans Affairs (VA), and is intended for veterans or active military members. An advantage of a VA loan:
• Typically no down payment.
Jumbo loan: A mortgage with a loan amount that is above the limits set by the government, also referred to as a non-conforming loan. This type of mortgage allows you to make a purchase on a home that exceeds the amount of money you would be able to acquire with a conforming fixed or adjustable rate loan. An advantage of a jumbo loan:
• If you are able to afford monthly payments, you can finance a larger loan without making a large down payment.
There is a range of mortgage products, so it is important to research what is best for your needs. Buddie, a mortgage banker, explains what to expect when it’s time to look for a mortgage: “Be prepared with a lot of different terms and acronyms when dealing with a mortgage banker and if there’s ever any time that you don’t understand, just ask.”
JA YUNG: When you’re dealing with trying to choose a mortgage that’s right for you, there are many options out there.
JA YUNG: The most common products that you would probably come across would be a fixed interest rate where the interest rate never changes and it’s a set number of years that you’re going to pay on the loan and when you’re done paying that period of time, that loan is paid off and you don’t owe anything more.
JA YUNG: Then you also have your adjustable rate mortgages where the interest rate may be fixed for a set period of time, let’s say one, three, five, or seven years, and then every year after that, the interest rate changes, so therefore your payment would be changing as well.
BUDDIE: So an FHA loan is a government sponsored loan that you can get in with a little bit lower of a down payment, typically that’s 3.5%.
JA YUNG: It’s a nice product for a first-time home buyer, but it’s really great for any home buyer who may have a little bit higher debt-to-income ratio or they may not have as much cash in the bank to be able to utilize for reserves, or somebody who doesn’t have the most perfect credit.
CURT: VA loans are for military folks, either current military or retired military and the benefits to a VA loan primarily are no down payment.
JA YUNG: When you’re dealing with a VA loan, one of the most important things is that we do have to verify your participation in the military.
JA YUNG: Jumbo loan is typically a loan that’s larger than what we would consider to be a conforming loan size. These are loan sizes that are established by the government based on what the median income and median house prices are. So jumbos are typically your larger loan sizes. It typically means that they’re higher interest rates and a little bit more strict credit guidelines.
TOM: Depending on the county you live in, across the country each county has a different limit. But normally speaking a jumbo loan is anything over $417,000.