At Almost Home Mortgage we offer all of today’s mortgage options. How long you anticipate keeping the loan along with your other financial goals will help determine which loan is right for you. We will take the time to make sure you know the pros and cons of each program so you can make an informed decision picking the product that best fits your needs.
Fixed rate mortgages
A fixed rate mortgage is just as the name implies, a rate that is fixed for the entire term of the loan. Fixed rate mortgages come in almost any length now, but 15, 20 and 30 year terms are the most popular. 30 year is the choice of most borrowers as it requires the lowest payment allowing you the most flexibility in your budget. The shorter the term the lower the rate, so for those with a bit extra in their budget, a shorter term with a higher payment may be an option.
Adjustable rate mortgages
An adjustable rate mortgage is a mortgage in which the rate can change throughout the loan term. There are many types of adjustables, these are some of the most common: 1 year, 3/1, 5/1, 7/1, 10/1; the first key to an adjustable is the first number. The first number represents the amount of years the initial rate is guaranteed. Example a 5/1 would mean that the rate you are being quoted is guaranteed for the first 5 years. With some exceptions, most adjustables become 1 year adjustable after the first term expires. So in that example your rate would be guaranteed for the first five years and then begin adjusting annually afterward for the remaining 25 years.
When your rate adjusts, it adjusts based on two factors, the index and the margin. The index is what is being used to set the rate. The most commonly used indices are the 1 year Treasury bill or the LIBOR; however, other less common indexes are occasionally utilized. Next you add the margin. The margin is also set in advance and is part of your note at closing. This is the number that is added to the index at each change to come up with the rate you will pay for the coming year. Since the indexes can change greatly from year to year, almost all adjustable mortgages have what are called Caps.
A Cap is a maximum that the rate can change or go up. Common caps are 2/6. In that example, your rate could not exceed 2% above your start rate at the first change and only increase 2% for each simultaneous change. The 6 represents the life cap. No matter how long you keep the loan or how high rates go with that example, your rate could never be any higher than 6% above the start rate. It is just as important to know the index, margin and caps as the start rate on an adjustable mortgage if there is ANY chance you will still have the mortgage at the first rate change.
FHA stands for Federal Housing Administration and offers insured mortgage options for those with less down, a bit more debt, or some credit challenges. FHA allows for lower credit scores and as little as 3.5% down which opens the door to homeownership to many that might not otherwise have had that opportunity.
The Veterans’ Administration offers loans to eligible Military with no down payment.
United States department of Agriculture offers loans to help with rural development. These loans are only offered in eligible rural areas and have household income limits; but should you qualify, will allow you to obtain 100% financing with very low mortgage insurance. There are a fair amount of eligible areas nearby and the household income limit is much higher than you might think. If down payment is an issue this loan is a wonderful option for many.