Thursday, August 30, 2012

Mortgage Update from Mary Adams at New American Mortgage

Mary Adams, New American Mortgage

Which Loan Type Is Best For Me?
Fixed Rate Mortgages

A fixed rate mortgage gives you peace of mind.  Regardless of fluctuations in the market, your principal and interest payment remains the same for the life of the loan.  Lenders generally offer Fixed Rate Mortgages for 10, 15, 20 and 30 year terms.  The longer the term of your mortgage, the lower the payment will be; with a shorter term, you will build equity more quickly.  Because they offer a monthly payment that does not change, Fixed Rate Mortgages loans are the traditional choice of home buyers who plan to stay in their homes for many years.  At New American Mortgage, we offer loan terms tailored to fit your financial needs.

Conventional fixed rate mortgages can be used to purchase 1 – 4 family primary residences, second homes and 1 – 4 family income producing properties.

Jumbo Mortgages

Homeowners seeking a mortgage on a higher than average priced home, may require a Jumbo Loan.  Government agencies set the loan amounts that determine if a mortgage is a Jumbo loan.  Jumbo loan amounts can vary throughout the country and change over time.

Most mortgages are sold to Fannie Mae and Freddie Mac, who set the standards for the maximum loan amount, minimum required down payment, and minimum required credit scores.  Loans that meet these standards are called conforming loans and generally have the most favorable interest rates.   The current limit for a conforming loan is $417,000 in most areas of the country.  Loans exceeding the conforming loan limit are called Jumbo Loans.  Numerous fixed rate and adjustable rate jumbo loan programs are available.  Jumbo loans generally require a larger down payment and have slightly higher rates than conforming loans. 

Adjustable Rate Mortgages

An adjustable rate mortgage may offer a lower initial rate and monthly payment than a conventional fixed rate mortgage.  After an initial term, the interest rate on an adjustable rate mortgage loan is re-set periodically to keep the rate in line with current market interest rates.  For example, a 3/1 ARM loan offers a fixed rate for the first three years; the interest rate adjusts once a year thereafter.  5/1, 7/1 or 10/1 ARM loans offer a fixed rate for the first 5, 7 or 10 years respectively, adjusting yearly thereafter. 

The lender sets the adjustable interest rate by adding a fixed percentage to an index rate.  When the interest rate goes up, your monthly payment increase; when the interest rate goes down, your monthly payment decreases.   

Most ARM loans have a periodic rate cap and lifetime cap to limit the amount the interest rate can increase, or decrease, each adjustment period and over the term of the loan. 

If the start rate is less than the fully indexed rate, your interest rate and monthly payment may increase significantly at the first adjustment – even if the index does not change.

An ARM may be the best choice for homeowners who intend to sell their homes within the first 3 – 10 years.

FHA Mortgages

Homeownership has long been recognized as a major component of the American Dream.  The Federal Housing Administrations loan programs enable more buyers to qualify for a mortgage. 

With flexible guidelines, FHA mortgages can be a viable choice for first time buyers, buyers with less than perfect credit, self employed buyers, buyers with limited liquid assets for a down payment, or buyers with short or interrupted employment histories.  FHA loans can also be used to refinance an existing mortgage.

The down payment on an FHA loan can be as low as 3.5% of the purchase price.  To reduce the amount of cash needed at closing, the upfront mortgage insurance premium can be included in the mortgage; borrowers will also be responsible for paying monthly mortgage insurance premiums. 

FHA mortgages can be used to finance 1 – 4 family primary residences.

VA Mortgages

If you are an active service person or qualified veteran, you may be able to obtain a mortgage on more favorable terms than your circumstances would otherwise allow.  The Department of Veteran’s Affairs does not provide the loan but, with government guarantees, mortgage providers are able to offer loans that may be advantageous to the veteran borrower. 

VA guaranteed loans may have less stringent qualification standards, lower down payment requirement and lower interest rates than conventional loans.  Monthly mortgage insurance is not required and there are limitations on closing costs.    

VA loans may be used to buy a primary 1 – 4 family residence or to refinance an existing loan. 
For detailed information on any of these loan products, please contact:

Mary Adams
Ann Arbor, MI 48104
Cell: 231.437.0301
eFax 734.585.3531

Market Update for the week of August 27, 2012

Rates continued to go down early last week, with the 30 year fixed conventional touching 3.375% and the FHA/VA rate touching 3.25%, but had modest increases on Friday, settling at 3.5% and 3.375%, respectively.  That trend is continuing this week, with rates bouncing between last week’s high and lows. 

Market Gurus predict that there will be a higher-than-normal amount of volatility through mid- September, and recommend locking.  

If you have a mortgage application in process, and plan to close before October, you may be wise to lock.  While rates could improve slightly, they could rise quickly!  With current rates near all-time lows….and volatility predicted to be high, you should proceed with caution if you decide to float!

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