In my time since becoming a realtor, I’ve been exposed to and have learned so much. From showing houses, to writing contracts, to doing housing searches, to negotiating contracts, it’s all been fun and exciting. But the area of the business I’ve skirted around and avoided the most is the crazy world of mortgages and mortgage loans. Before starting here I never had to worry about them. On top of that they usually involve way too many numbers (Rob and math have never really been best of friends.) But have no fear! With the help and wisdom from my friend Tina Marshall, (Senior Mortgage Consultant with Movement Mortgage. Give her a call she’s the best!) she straightened me out a bit in the intimidating world of home financing and mortgage loans (Still hope there’s no quiz on the material Tina). Here are a few of the major different types of loans you can use when purchasing a home:
1. Federal Housing Administration Loan (FHA Loan) – Government-subsidized loan with low down payment (say 3.5 % of the sales price) and closing fees included; the government guarantees the loan. These can be good because they give low rates for those who can’t come up with the down payment or have less-than-perfect credit. Also work great for first-time home-buyers. But if you can afford something higher like 5 percent down, you might find better rates with conventional loans.
2. VA Loans – A zero-down loan offered to veterans only. The VA guarantees the loan for lenders. These are good because you put nothing down, and no mortgage insurance. But the rate might be higher than conventional loans or FHA loans, depending on your situation.
3. Conventional Loans – Conventional loans offer some flexibility in the type of loan you can obtain. For example, a conventional lender may be able to offer you an adjustable-rate mortgage, in which your interest rate is lower for a set period at the beginning of the loan, and higher after that period ends. Or a fixed rate mortgage, where your interest is fixed for a certain amount of time, say 10, 15, 20, 30, or even 40 or 50 years, at which point the amortized principal is paid in full. Conventional loans are not guaranteed or insured by the government.
4. Conforming Mortgage Loan – Any mortgage loan at or below the amount (below $417k) Fannie Mae and Freddie Mac (The nation’s two federally chartered and stockholder-owned mortgage finance companies) can purchase and/or securitize in the secondary mortgage market.
5. Jumbo Mortgage Loan – A mortgage loan for an amount exceeding the Fannie Mae and Freddie Mac loan limit (above $417k). Because the two agencies can’t purchase the loan from the lender, jumbo loans carry higher interest rates.
I hope you’re fired up and excited and feel like a mortgage loan wizard, I know I do!
-Rob Logan