Unlike fixed rate mortgages, an adjustable rate mortgage (“ARM”) has an interest rate that will change periodically. The initial interest rate of an ARM is lower than that of a fixed rate mortgage and is typically fixed for a 3, 5, 7, 10 year term. After the fixed term, the interest rate adjusts based on a pre-determined margin and index defined in the note
A fixed rate mortgage is a fully amortizing mortgage loan where the interest rate and the monthly payment on the note remain the same throughout the term of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15 years and 10 year terms. Generally, the shorter the term of a loan, the lower the interest rate available. The most popular mortgage terms are 30 and 15 years.
An interest only loan is a loan in which, for a set term, the borrower pays only the interest on the principal balance, with the principal balance unchanged.
The Home Affordable Refinance Program, also known as HARP, is a federal program of the United States, set up by the Federal Housing Finance Agency in March 2009 to help underwater and near-underwater homeowners refinance their mortgages.
You may be eligible for HARP if you meet all of the following criteria:
- The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
- The current loan-to-value (LTV) ratio must be greater than 80%.
- The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.
Many states, counties and cities provide low to moderate housing finance programs, down payment assistance programs, or programs tailored specifically for a first-time buyer. You should always check in the area in which you are looking to buy. The CHDAP program is one currently being offered throughout California.
California Homebuyer’s Down Payment Assistance Program (CHDAP)
CalHFA offers a subordinate loan program called CHDAP. It is also described as a “silent second”, meaning payments on this loan are deferred so you do not have to make a payment on this assistance until your home is sold, refinanced or paid in full. This helps to keep your monthly mortgage payment affordable. The CHDAP provides this deferred-payment junior loan – up to 3% of the purchase price, or appraised value, whichever is less, to be used for their down payment and/or closing costs.
Source: CALHFA http://www.calhfa.ca.gov/homebuyer/
HomePath financing is special financing available only on Fannie Mae-owned properties. It offers great benefits, including low down payments, no mortgage insurance, expanded seller contributions, and more. HomePath Mortgage is available for move-in ready properties for both owner occupants and investors.
A mortgage loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain home financing. The Department of Veterans Affairs does not directly originate VA loans; instead, they establish the rules for those who may qualify, dictate the terms of the mortgages offered and insure VA loans against default. Borrowers need to provide a Certificate of Eligibility to be able to verify they are eligible for a VA-guaranteed home loan.
An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans allow the borrower to borrow up to 96.5% of the value of the home. The 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time buyers.
Jumbo loans are those that exceed the Fannie Mae/Freddie Mac guideline limits.
In addition, Fannie Mae and Freddie Mac have instituted high balance loans in high-cost areas. These limits are also set annually. The maximum loan size is depicted below:
|Units||High Balance Loan Limit|
A Conforming Loan is a loan secured by a one to four unit property, including condos, co-ops and manufactured housing that conforms to Fannie Mae or Freddie Mac’s loan guidelines. Their guidelines are published on an annual basis. The maximum loan size is depicted below:
|Units||Conforming Loan Limit|