Mortgages
A mortgage is a method of using property as security for the payment
of debt.
Mortgage Loan programs come in
many forms and from many
sources. The two basic types of amortized loans are the fixed rate mortgage
(FRM) and adjustable rate mortgage (ARM). Just as the loan structure, like a 30 year fixed rate mortgage, can
affect your interest rate and monthly payments, the source of funding for
your Mortgage Loan can also affect your rate and payments.
Mortgage Loan Lenders generally require minimum 3% of the loan
amount as a down payment. If you can affords 3%, you may consider the most
common type of mortgage loan, which called: ”Conventional Loan”. These
loans consist of conforming loans, which are secured by
government-sponsored
entities such as
Fannie Mae and Freddie
Mac. If you need a “Jumbo” mortgage loan then you need to contact
to private investors or regular banks.
Conforming mortgage loans are funded by
Fannie Mae (FNMA) and
Freddie Mac (FHLMC).
These companies do not lend money directly to you, but work with lenders
across the country to offer mortgage loans to meet your needs. As a
secondary market for mortgage loans, they purchase mortgages from lenders
and package them into securities that can be sold to investors.
If you are looking for a large home mortgage loan amount to purchase or
refinance, you could consider a jumbo home mortgage loan, which has a higher
loan amount limit than the limits set by Fannie Mae and Freddie Mac. Because
jumbo mortgage loans cannot be funded by these two agencies,
they usually carry a higher interest rate.
The Federal Government, state, local and private entities have developed
programs to help you purchase a home with a low down payment. If you are a
first time homebuyer or have low to moderate income, you may be eligible for
a home mortgage insured by the
Department of Housing and Urban
Development (HUD) through the
Federal Housing Administration
(FHA). While FHA does not make or buy mortgage loans, they insure FHA loans so
that if you default on the loan, the lender will get reimbursed. You may be
able to get an FHA mortgage loan with a low down payment of only 3% of the loan
amount or less. While there are limits to the size of FHA mortgage loans, they are
generous enough to handle moderately priced homes almost anywhere in the
country.
If you are a veteran or qualify by military service or other entitlements,
FHA mortgage insurance can also be combined with a guarantee from the
Veteran's Administration. VA mortgages were created to help veterans achieve
the American dream and buy their own homes. VA loans offer low to no down
payments with many of the same benefits as an FHA loan.
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No Down-payment Mortgage Loan
- (100% Financing) -- 80/20 Option
The main advantage of this type of mortgage loan, also known as 100% financing, is
the ability to buy a home with almost no money down. If you have a strong
credit profile but have limited funds to commit to a down payment, 80/20
mortgage might be right for you. Lenders typically require a down payment of
at least, 3 to 20 percent of the purchase price. If the mortgage loan amount is for
more than 80 percent of the purchase price, private mortgage insurance (or PMI) is usually required.
You can avoid paying PMI by getting a second mortgage ('piggyback
loan') to back up your first mortgage. The first mortgage is provided for 80
percent of the cost of the mortgage and the 'piggyback' second mortgage
is for the remaining 20 percent. The 80 percent first mortgage can be a fixed-rate (15-years or 30-years), adjustable-rate
(usually 5/1, 7/1 or 10/1 fixed period ARM) or interest-only loan.
The 20 percent second mortgage can be a home equity line of
credit that changes with the prime rate. Combined, the two loans allow you
to purchase 100% of your home with no money down.
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