For RTS Orlando Faculty and Students
An Online Real Estate and Housing Resource for the Reformed Theological Seminary Community in Orlando.
Brought to you by David Gallup
An Online Real Estate and Housing Resource for the Reformed Theological Seminary Community in Orlando.
Brought to you by David Gallup
some of the most common:
The interest rate on a fixed rate mortgage remains the same throughout the term of the loan, usually 15 or 30 years making the payment very predictable. However, rates initially tend to be higher than adjustable rate loans and are generally not assumable by a subsequent buyer.
A balloon mortgage is a loan that must be paid off after a certain period. The advantage they offer is an interest rate that is lower than a mortgage that is made for 30 years.
This interest rate on this loan is linked to a financial index, such as a Treasury security or a cost of funds, so your monthly payments can vary up or down over the life of the loan, usually 25 to 30 years. Interest rates may also be adjustable monthly, annually, or every year after the initial 3 or 5 year fixed rate period. Most ARM's have a cap on the allowable rate increase, to offer the borrower some protection.
Five other terms relating to adjustable-rate mortgages:
example would be a One Year ARM with annual interest rate adjustments.
change at each adjustment or over the life of the loan.
an ARM to a fixed rate loan, usually after the first adjustment period. This may require additional fees.
the mortgage rate over the term of the loan. For example, the One Year U.S. Treasury bill is a commonly used index and can be found published each business day in financial journals.
to calculate the ARM's interest rate prior to each adjustment.
The Veterans Administration does not lend money. However, it guarantees a portion of the loan so that lenders who originate the loan feel comfortable with their risk. Qualified veterans can obtain loans up to $417,000 with no down payment. VA-guaranteed loans can be combined with second mortgages and are assumable upon qualifying by a future buyer. VA charges a VA funding fee that increases each time the veteran obtains a new loan.
The Federal Housing Administration also does not lend money or make loans; rather, it insures loans. The down payment can be as low as 3.5%. Either buyer or seller may pay discount points. FHA charges an 1% up front Mortgage Insurance Premium that can be financed in the mortgage amount or paid in cash. The borrower must also pay an annual Mortgage Insurance Premium or .86%, which is collected monthly.
The seller of the house lends the buyer enough to make up the difference between the purchase price and the down payment plus first-mortgage balance The terms, including the interest rate, are based on buyer/seller agreement. It is often a short-term (5 to 15 year) loan; sometimes "interest only" payments until the term date when the balance is due in full. Also, a buyer might be able to negotiate a lump sum payment at a future date which could be very advantageous to the Buyer.
Buyer "takes over" or assumes the mortgage obligation of the seller (with concurrence of the lender). The interest rate doesn't change and is sometimes lower than current rates. Often the loan fees are also substantially less.
United States Department of Agriculture doesn't loan money. However, it guarantees a portion of the loan so the lenders who originate it can feel comfortable with their risk. The property must be in a county or portion of the county that is designated as Rural by the USDA. Surprisingly, there are stil portions of Orange and Seminole county that qualify. Qualified buyers may obtain loans up to 102% of the appraised value of the home (100% plus the 2% USDA Loan guarantee fee with zero down payment.
The Mortgage lending requirements have changed in the past few years. Though an excellent idea, putting 20% down on a house is no longer a requirement. However, anything less than 20 percent down requires mortgage insurance to protect the lender's risk of a borrower default.
A good mortgage banker or broker can consult with you to help you determine which loan program is right for your situation and what you are trying to accomplish.
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