What are the basic types of loans I should know about? You’ll want to explore these and others in detail to see which plan best suits your needs.
Fixed Rate Conventional Mortgage
Are typically paid off in equal monthly payments amortized over 30 years. The interest rate stays the same for the life of the loan, therefore the monthly principal and interest payments remain constant. Terms of a conventional loan vary among lenders.
When the down payment is less than 20% it is necessary to obtain private mortgage insurance (PMI). If PMI is required, after obtaining 20% equity in the property you can request that the lender drop the mortgage insurance.
Adjustable Rate Mortgage (ARM)
The interest rate may increase or decrease over the years and is tied to a financial market index (one-year Treasury Bills). Payments may also be adjusted in a periodic schedule. Many ARM loans set a maximum adjustment on possible increases to interest rates for the life of the loan.
If an ARM starts out at a 5% interest rate with a 6 percent "cap", the interest rate could not go above 11%. Make sure to check out the rate increase: it could be one or two points’ incremental increases.
FHA (Federal Housing Administration) Loans
Strictly speaking FHA does not make loans; rather it insures loans, which increases lenders’ willingness to make low down payment loans.
The down payment normally is 3% of the loan amount. It is broken down to 3% of the first Hundred Thousand and 5% of the remaining balance.
The maximum loan amount for a FHA loan is $625,000. FHA charges an advance mortgage insurance premium (MIP) fee for the life of the loan.
VA Loan
Qualified veterans can take out loans up to $625,500 a specific limit with no down payment required "no mortgage insurance", or a higher limit with a down payment. Actual income qualifications are dependent on the type of loan requested. VA charges the buyer a funding fee, which can be rolled into the loan. Most of the VA guaranteed loans are assumable to nonmilitary buyers with prior VA approval.
Seller Financing Options
It is possible to purchase a home without putting a down payment and I am sure your wondering just how realistic this sort of transaction is. The answer is that it’s not only realistic; it’s done every day!
Seller financing is not some kind of financing scheme. It is simply changing the rules of traditional financing as we have known it for hundreds of years. It is the application of finance through creative thinking.
WOW, IT REALLY WORKS! I Knew it was a good time to own real estate but I didn't have tens of thousands of dollars to put down. Then I saw an ad from Creative Realty about being able to own a home without a down payment or too good to be true? Today I own a home without a down payment. If you're the least bit curious, give them a call and they'll help you to own a home too, I am glad I did. They never applied pressure and assisted me throughout the entire process. It really does work!
Troy Nakata Aiea, Hawaii
The most common type of creative financing involves the use of a second mortgage, often called an Agreement of Sale or Purchase Money Mortgage. Keep in mind with Agreement of Sale seller retains title and with the Purchase Money Mortgage title passes to buyer(s). When ever possible it is recommended to utilize the Purchase Money Mortgage.
There are many creative-financing techniques that can help buyers and sellers alike. A knowledgeable real estate professional can help formulate a plan that best fits your personal financial situation and goals. The most common type of creative financing involves the use of a second mortgage, often called an Agreement of Sale or Purchase Money Mortgage. The catch, the hard part, is to find a seller who has sufficient equity and who doesn’t want to cash out. Nevertheless, such sellers exist. You just have to find them and we can assist in locating such opportunities.
