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FINANCING YOUR HOME
One of the most important decisions you will need to make is
what type of mortgage is best for you. Many purchasers obtain a
pre-approval for a mortgage before they decide to look for a
home. Not only does this pre-approval determine the amount of
mortgage you qualify for, it also determines what is the best
type of mortgage for you and the amount of funds you will need
to invest to purchase your home.
There are hundreds of
mortgage companies as well as hundreds of mortgage programs. A
few of the most appealing types are detailed below.
VA FINANCING
Veterans Administration loans are available for those who
have served in the Armed Forces. The maximum VA loan in our area
is $203,000. You may use your VA loan entitlement more than one
time as long as your previous entitlement has been cleared. VA
loans account for about 25% of our market in Kent County.
Mortgage companies can normally process the loan very quickly.
We have worked with many veterans who have purchased using the
VA loan. Call us for easy pre-qualifying to see how much home
you can afford, or we can have you pre-approved for a VA loan by
a direct endorsement mortgage lender.
FHA FINANCING
Many purchasers who are not veterans use the FHA loan
program because it is one of the programs that require the least
cash down. The maximum loan is $132,500 in Kent County. FHA
loans are based upon income and qualifying, not whether you have
ever purchased a home before. Many first- time buyers use the
FHA program. The seller may assist with payment of some of the
purchasers' closing costs. FHA qualifying guidelines allow 29%
of total monthly income to go toward the proposed mortgage
payment and 41% to total payments including the proposed
mortgage payment.
Conventional Financing
Conventional financing accounts for the majority of
financing types used in our marketplace. There is an abundance
of programs with some requiring as little as 3% down. Typically
some of the programs require 5% or more down. Private mortgage
insurance (PMI) is required with less than 20% down unless you
are using a program like the 80-10-10. Call us for specifics!
80-10-10
This is a type of conventional loan that allows the borrower to
obtain a first mortgage for 80% of the value and a second
mortgage/credit line for 10% of the value, the remaining 10% is
the cash down payment. This program allows the purchaser to
avoid paying private mortgage insurance and thereby have a total
payment less than a standard 10% down loan. A few lenders have
this type of program.
Buy Down
This is a type of loan that allows the borrower to pre-pay
interest up front to reduce initial interest payments. These
types of mortgages are available for FHA or Conventional loans.
This is a good mortgage product for those who have trouble
qualifying at the market rate, but expect pay increase in the
near future.
Adjustable Rate Mortgages
This type of conventional loan allows the borrower to start
out at a lower rate. The loan adjusts usually at a set term
either up or down, depending on what the market does. Some
adjustable loans automatically adjust annually. These loans
usually have a cap on the interest rate as to how high it can
adjust. Not used much when interest rates are reasonable, this
type loan is good when interest rates are high.
Balloon Mortgages
For the homeowner who plans on being in the home only a
short period of time, three, five or seven years, this loan
offers a slightly lower rate than standard conventional loans.
The loan becomes payable in full at the end of the period. If
the borrower is still in the home, he must refinance before the
end of this period.
Other Types
There are many other types and variations on mortgages. Finding
the right one that fits your needs is usually as important as
finding the right home. Plan to become pre-qualified before you
start house hunting. This will give you a good idea of the total
investment you will need to make when buying a home and a good
idea of closing costs.
Special Programs
Many special programs are available for first time buyers
throughout the year such as State Bond Programs, MBNA Funds,
etc. These programs are designed to assist the first time buyer
obtain their first home. Most have income limits and other
criteria on the maximum value of the home that can be purchased.
If you are a first time buyer, you will need to be prepared in
advance since these funds usually run out fast.
Please give us a call or contact us using
our online feedback form for more
information about your financing options. |
