CONVENTIONAL

30 to 10 Year Fixed Rates

A “fixed-rate” mortgage comes with an interest rate that won’t change for the life of your home loan. A “conventional” (conforming) mortgage is a loan that conforms to established guidelines for the size of the loan and your financial situation. Conventional loans may feature lower interest rates than jumbo loans, FHA loans or VA loans. Terms of these conventional loans typically range from 10 to 30 years.

Monthly principal and interest payments on a conventional fixed-rate mortgage remain the same for the life of the loan making it an attractive option for borrowers who plan to stay in their home for several years. The alternative to the fixed-rate mortgage is the adjustable-rate mortgage (ARM), which features lower monthly principle and interest payments during the first few years. While many prefer the security of a fixed-rate loan, an ARM may be a better option – especially if you know you’ll be moving within the next several years. The 30-year conventional fixed-rate mortgage has long been popular due to its fixed interest rate and lower monthly payments. However, since the interest payments are spread out over 30 years, you’ll pay more interest over the life of the loan than you would on a shorter-term mortgage.

With a short loan term and lower interest rate, a 10, 15- or 20-year fixed-rate mortgage can help you pay off your home faster and build equity more quickly, although your monthly payments will be higher than with a 30-year loan. The 15- and 20-year fixed-rate mortgages are especially popular for refinancing.

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JUMBO LOAN

A jumbo mortgage, or jumbo loan, is a home loan that’s bigger than the conforming loan limits set by Fannie Mae and Freddie Mac. Also called non-conforming mortgages, jumbo loans are considered riskier for lenders because these loans aren’t guaranteed by Fannie and Freddie, meaning the lender is not protected from losses if a borrower defaults.
Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms. Credit scores typically need to be higher than 700. You may need a jumbo loan if the amount you need to borrow is over the federal conforming loan limits in your county. In most of Florida that limit is currently $484.350.

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FHA LOANS

FHA purchase and refinance loans are insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.

FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are typically lower than conventional loan rates. This is especially helpful for those borrowers with less than stellar credit. A borrower with a 660 credit score might qualify for the same rate as a conventional borrower with a 740 credit score.

Some of the other benefits of FHA financing:

  • Only a 3.5 percent down payment is required.
  • Lower monthly mortgage insurance premiums
  • More flexible underwriting criteria than conventional
  • Loans are assumable to qualified buyers.

There are several “cons’ though to consider with FHA financing:
Monthly MI payments can NEVER be removed as they can be with conventional loans, even when the borrower has accrued 20% equity in the property.

There is an upfront Mortgage Insurance Payment (MIP) required that is 1.75% of the loan amount. This can be financed when added to the loan amount so it’s not necessary to have those funds for closing. However, it is an added expense that similar conventional loans don’t require.

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VA LOANS

VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.

Other benefits of a VA loan include:

  • Closing costs are comparable and sometimes lower – than other financing types.
  • No private mortgage insurance requirement.
  • Right to prepay loan without penalties
  • The Mortgage can be taken over (or assumed) by the buyer when a home is sold.
  • Counseling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.

Although mortgage insurance is not required, the VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.

A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.

Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program. A Certificate of Eligibility from the VA must be presented to the lender to qualify for the loan.

If you need an FHA or VA mortgage loan in South Florida, Please call First Southeast Mortgage Corporation, your Hometown lender.

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REVERSE MORTGAGE

Is a Reverse Mortgage for You?
Reverse mortgages (sometimes referred to as “home equity conversion loans”) enable older homeowners to use their built-up home equity without selling their home. Deciding how you would like to be paid: by a monthly payment, a line of credit, or a one-time payment, you can take out a loan based on your home equity. The borrowed money does not have to be paid back until the borrower sells the home, moves out, or dies. You or representative of your estate has to pay back the reverse mortgage loan, interest accrued, and finance charges at the time your home is sold, or you are no longer living in it.

Who is Able to Participate?
Most reverse mortgages are appropriate for borrowers who are at least 62 years of age, have a small or zero balance in a mortgage and use the property as your principal living place.

Many homeowners who live on a fixed income and find themselves needing additional funds find reverse mortgages advantageous for their situation. Interest rates can be fixed or adjustable while the funds are nontaxable and don’t affect Medicare or Social Security benefits. Your lending institution will not take away your property if you outlive your loan nor will you be forced to sell your residence to repay the loan even if the loan balance grows to exceed current property value. Contact us at 954.920.9799 to look into your reverse mortgage options.

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HARD EQUITY LOAN

Hard Equity Loans are usually best for investment properties and for borrowers with sufficient assets but, perhaps, have factors that prevent them from obtaining a conventional loan. In these cases a lender is only lending based on the value of the property. In most cases a minimum of 30% downpayment will be required and the interest rate will be much higher the on conventional loans due to the lender’s increased risk.

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USDA LOAN

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REFINANCING OPTIONS

Choosing a Refinancing Program

When you are overwhelmed with all the choices, it may seem as if there are even more refinance loan programs than applicants! Call us at 954.920.9799 and we will match you with the refinance loan program that best fits you. There are several questions to ask yourself while you look at the options.

Lowering Your Payments

Are getting reduced monthly payments and an improved rate your main reasons for refinancing? If so, getting a low, fixed-rate loan might be a good option for you. Perhaps you are currently in a mortgage with a high, fixed interest rate, or a mortgage loan with which the rate of interest varies : an adjustable rate mortgage (ARM). Even if rates rise later, unlike with your ARM, when you get a fixed rate mortgage, you set the low rate for the term of your loan. A fixed-rate mortgage can be particularly a good choice if you aren’t planning a move within the next 5 years or so. On the other hand, if you do see yourself moving within the next few years, an ARM mortgage with a low initial rate might be the best way to reduce your monthly payment.

Cashing Out

Is “cashing out” your main reason for your refinance? It could be you’re going on a much needed vacation; you have to pay college tuition for your child; or you are updating your kitchen. With this in mind, you’ll need to apply for a loan higher than the balance remaining on your existing mortgage loan.So you’ll want You might not have an increase in your mortgage payment, though, if you’ve had your existing mortgage for a while, and/or your interest rate is high.

Debt Consolidation

Do you want to cash out some of your equity to consolidate additional debt? Great idea! If you have a fair amount of home equity, taking care of other debt with rates higher than your mortgage (credit cards or home equity loans, for example) may help save you a lot of money every month.

Getting a Shorter Term Loan

Are you wanting to fatten your home equity faster, and get your mortgage paid off more quickly? If this is your goal, the refinance mortgage can change you to a mortgage program with a shorter term, such as a 15 year loan. You will be paying less interest and growing your equity faster, even though your monthly payments will likely be more than they were. Conversely, if your existing longer term mortgage loan has a small remaining balance, and was closed a number of years ago, you may even be able to make the change without paying more each month. To help you understand your options and the multiple benefits of refinancing, please contact us at 954.920.9799. We are here for you.

When is Refinancing Worth it?

Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your existing rate? Maybe several years ago that was good advice, but it may be time to take a serious look. A refinance can be worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate

Advantages

You might be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced loan. You might also have the ability to “cash out” a portion of the built-up equity in your residence, which you may use to consolidate debts, improve your home, or plan a vacation. You may be able to refinance into a shorter-term mortgage program, enabling you to add to your equity quicker.

Fees and Expenses

As you probably know, you’ll have some fees and expenses during your process of refinancing. You’ll pay the same types of expenses and fees as with your existing home loan. Included in the list might be an appraisal, underwriting fees, lender’s title insurance, settlement costs, and other fees.

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FIXED VS. ADJUSTABLE

Fixed versus adjustable rate loans

With a fixed-rate loan, your monthly payment never changes for the life of your loan. The amount of the payment that goes for principal (the amount you borrowed) will increase, but the amount you pay in interest will decrease accordingly. The property taxes and homeowners insurance which are almost always part of the payment will increase over time, but generally, payment amounts on fixed rate loans vary little.

At the beginning of a a fixed-rate mortgage loan, the majority the payment is applied to interest. As you pay on the loan, more of your payment is applied to principal.

Borrowers can choose a fixed-rate loan to lock in a low interest rate. People select these types of loans when interest rates are low and they want to lock in the low rate. For homeowners who have an ARM now, refinancing into a fixed-rate loan can provide more consistency in monthly payments. If you have an Adjustable Rate Mortgage (ARM) now, we’ll be glad to assist you in locking a fixed-rate at a good rate. Call First Southeast Mortgage Corporation at 954.920.9799 for details.

There are many kinds of Adjustable Rate Mortgages. Generally, interest rates on ARMs are determined by a federal index. A few of these are: the 6-month CD rate, the one-year rate on Treasure Securities, the Federal Home Loan Bank’s 11th District Cost of Funds Index (COFI), or others.

Most programs have a cap that protects borrowers from sudden monthly payment increases. Some ARMs can’t adjust more than two percent per year, regardless of the underlying interest rate. Your loan may have a “payment cap” that instead of capping the interest rate directly, caps the amount your payment can increase in one period. Almost all ARMs also cap your interest rate over the life of the loan period.

ARMs most often have the lowest rates toward the start of the loan. They provide that interest rate for an initial period that varies greatly. You’ve probably read about 5/1 or 3/1 ARMs. For these loans, the introductory rate is fixed for three or five years. It then adjusts every year. These kinds of loans are fixed for a number of years (3 or 5), then adjust. Loans like this are best for borrowers who anticipate moving within three or five years. These types of adjustable rate programs benefit people who plan to sell their house or refinance before the initial lock expires.

You might choose an ARM to get a lower introductory rate and plan on moving, refinancing or absorbing the higher rate after the introductory rate expires. ARMs can be risky when property values decrease and borrowers can’t sell or refinance.

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