LOAN PROGRAMS

FIXED-RATE LOAN

 

 Lock in your rate and leave it. 

A fixed-rate loan keeps the interest rate fixed throughout the life of the loan. The principal and interest on your loan payment also never changes.

If you plan to own your home for a long time, or if you just like the comfort of knowing that the principal and interest on your loan payment won’t change, a fixed-rate loan might be the way to go. 

Pros:

• You’ll know exactly how much interest you’ll pay over the life of the loan.
• Peace of mind. The rate won’t change, and neither will your principal and interest payment change each month.

Cons:

• Fixed rates are typically higher than initial rates for adjustable-rate loans.
• If rates drop below what you’re paying on your loan, you won’t be able to take advantage of the lower rate unless you refinance.     

 

 

FHA LOAN

 

An FHA loan is a low-down-payment option for first-time homebuyers.

An FHA loan is a loan backed by the Federal Housing Administration (FHA)  that allows for smaller down payments. FHA loans also feature less-stringent qualifying criteria such as flexible income and credit guidelines.

The FHA does require borrower-paid mortgage insurance. The Mortgage Insurance Premium (MIP) can be financed into the loan amount. 

Pros:

• You can make a smaller down payment.
• You may be eligible to secure a down payment in the form of a community second mortgage. This second mortgage allows buyers to purchase a home with less of a down payment.
• Credit score and cash reserve requirements are relaxed.

Cons:

• Mortgage insurance is required.
• Property standards must be met—which means it might not be a loan for a fixer-upper.

 

ADJUSTABLE

 

Lower your initial monthly payment.

An adjustable-rate mortgage (ARM) features an initial period with a fixed interest rate followed by an adjustable phase during which the rate can change. ARMs typically feature lower initial interest rates and lower monthly payments for the first few years of the loan, and then they adjust upward (or even down) based on market conditions and loan terms.

One of the ARM products we offer is a 5/1 ARM (sometimes referred to as a fixed-period ARM), in which the interest rate is fixed for the first five years of the loan and then adjusts annually for the remainder of the loan term.

Pros:

• It generally offers a lower initial monthly payment compared to a fixed-rate loan.
• It’s a possible way to save money if you plan on living in your home for only a few years or plan to refinance after a few years.
• You can manage higher interest rates and payments later as your income grows to meet those expenses.

Cons:

• You’re subject to interest rate changes that are out of your control.
• It’s unpredictable. After the fixed-rate phase, you won’t know exactly what your payment will be from year to year.

 

VA

 

The Veterans Administration (VA) offers one of the most flexible loan programs for eligible* Veterans. No down payment financing is available. For eligible homebuyers with full entitlement, there are no loan limits. For homebuyers with less than full entitlement, conforming loan limits apply.

Debt-to-income ratios are also flexible and include consideration for geographic location, family size, and residual income.

Pros:

• A down payment is not required.
• There is no mortgage insurance requirement.
• Qualifying conditions are less stringent.
• No loan limits for eligible homebuyers with full entitlement.

Cons:

• A VA funding fee is required.
• Veterans are responsible for closing costs and prepaid items.
• VA loans are for purchases of primary residences only.

JUMBO

 

Got your eye on a higher-priced home? A jumbo (or non-conforming) loan might be an option if you’re considering a loan over the conforming loan limits. Loans under the conforming loan limits are known as conforming loans. Jumbo or non-conforming loans are over this limit.

Conforming loan limits are established by the Federal Housing Finance Agency (FHFA) and change every year. Some areas may be considered “high-cost” if the median home value is higher than the conforming loan limit. In this case, the conforming loan limit may be higher in that area. (Ask your RG Professional for details.)

Jumbo loan programs allow for some flexibility and include both fixed-rate and adjustable-rate plans.

Pros:

• Jumbo loans offer affordable terms for higher-priced homes.
• They are ideal for high-income earners with good credit.
• Low-down-payment options are available.

Cons:

• Interest rates are higher.
• Qualification standards may be tougher.

 

USDA

 

Zero down for something out of town.

The U.S. Department of Agriculture (USDA) offers a loan program that is attractive for first-time homebuyers of residences in designated rural areas. Options include loans with little or no down payment, lower interest rates, and closing costs that can be financed into the loan. Income limits (determined by location) are also a consideration, and the home must be owner-occupied.

Don’t be confused by the term “rural.” Rural areas and home types vary. Many homes that qualify for this program are in traditional developments. Be sure to ask your RG Professional for details about designated rural areas.

Pros:

• No down payment is required (though limitations apply).
• Interest rates are lower.
• Closing costs can be rolled into the loan.
• There are no lot size restrictions.

Cons:

• USDA loans are limited to homes within designated rural areas.
• Mortgage insurance is required.
• Income restrictions apply.
• The home must be owner-occupied.