Category: Mortgage Loans

HOW DO ADJUSTABLE RATE MORTGAGES WORK?

An Adjustable Rate Mortgage (ARM) is typically a mortgage that is fixed for a period of time, and then becomes adjustable. The typical ARMs are 3/1, 5/1, 7/1, and 10/1. The first number represents the time period the rate is fixed. The second number represents how often the rate changes. Example: A 3/1 ARM means the rate is fixed for 3 years, and then adjusts each year thereafter. The loan typically has a 30 year term. ARM rates are typically lower than 30-year fixed rates. If you know you will only be in the home for a short period of...

Read More

ARE YOU FINANCING A HOME WITH SOLAR PANELS?

Solar panels are increasingly popular, and many homes on the market have solar panels nowadays. If you are looking to finance a home with solar panels, you should consider the following rules: Many solar companies will file a UCC-1 Financing Statement on the title of the home. Mortgage lenders will likely request it to be removed so they can secure their lien. After the mortgage is recorded, the solar company can then refile the UCC-1. Even though the home will be operating with solar power, it must maintain access to traditional electric utilities. The lender wants to ensure there is...

Read More

CAN I GET A MORTGAGE UNDER 3%?

Everyone wants the lowest interest rate at the lowest costs. Can you get a rate today under 3% with no points? Maybe. There are many factors that go into an interest rate: Credit score Loan-to-value ratio (LTV) Term of loan- 30 years, 15 years, etc. Is it for a primary residence, second home or investment property Purpose, i.e. purchase, finance, or cash-out refinance Loan Amount Type of loan, i.e. conforming, jumbo (loan amounts on excess of $510,400), VA, FHA, USDA

Read More

HOW MUCH OF A DOWN PAYMENT DO I NEED?

How much money should you put down on the purchase of a property? If you just want to put the minimum down, then you are generally looking at 3% down for a primary residence (unless it is a down payment assistance, VA, or USDA loan), 10% down for a second/vacation home, and 20% down for investment properties.   However, if you can make more than the minimum down payment, then you may want to consider the following factors. One factor is the rate of return your money is currently making as compared to the rate at which you will borrow....

Read More

COMMODITIZATION OF MORTGAGES

All you have to do is push a button and get a mortgage? If so, what kind of mortgage are you getting? Is it the right mortgage for you? Does it matter? There is a definite trend in the media to commoditize mortgages. That is, to try to influence you that you don’t need to speak to anyone, just click a few buttons and you will get a mortgage. But, what mortgage are you getting? Are you getting a 30-year fixed? If so, what is the rate and the lender’s costs? Are you willing to pay more for a loan...

Read More

LOAN AMORTIZATION: WHAT DOES THIS MEAN?

Mortgage loans are typically amortized over 30 years. What does this mean? A borrower will pay a combination of principal and interest payments over a 30 year term. The interest is front loaded, so for approximately the first ½ of the loan term, the borrower is paying more interest than principal. Loans typically do not last the full 30 years, as homes are sold or loans are refinanced. By front-loading the interest, lenders are assured profit prior to the loan being paid off. Example: assume a borrower obtains a $300,000 loan at 4.5% on a 30-year fixed mortgage. The monthly...

Read More

WHAT IS AN ARM

An ARM is an adjustable rate mortgage. Many ARMs are like the 5/1 ARM, where the rate is fixed for the first 5 years of the loan, and then adjusts every year thereafter for the balance of the loan term. There is another ARM product called the 5/5 ARM. This product has a low initial fixed rate for five years, and then adjusts and is fixed for another five years. Thus, there are only 2 adjustments to the rate over the first 15 years of the loan. It will adjust to the 5-year CMT (Constant Maturity Treasury index) plus a...

Read More

WHAT HAPPENS TO YOUR LOAN AFTER IT CLOSES?

What happens to your loan after it closes? It is typically sold by the lender. Two sales take place: • The lender will sell the Note, which is the document you sign at closing promising to pay the loan over time; the servicing rights to the loan will be sold. • The servicing rights are the rights to receive the payments on the loan; the servicer is to whom you make the payments. *The buyer of the Note may not be the same as the buyer of the servicing rights. If you are trying to modify a loan, or ask...

Read More