The fixed-rate mortgage is the most commonly chosen home loan program. The interest rate remains constant throughout the life of the loan, resulting in predictable monthly mortgage payments. Terms can be 10, 15, 20, 30 and 40 years.

Why Home Buyers Choose It

If you plan to stay in your home for a long period of time and would like the surety of reliable monthly payments, a fixed-rate mortgage may be the best option for you. Choosing a fixed rate mortgage allows borrowers to take advantage of today’s favorable market rates, protecting them from future market volatility.

Compared to fixed rate mortgages, Adjustable Rate Mortgages, or ARMs as they are commonly known, offer a lower interest rate to start, so your monthly payments are generally lower. After an initial period, the rates are adjusted at set times based on a pre-determined index. The initial fixed period ranges from one month to 10 years, depending on the ARM program. To protect you in times of extreme market fluctuation, the amount a rate can change at each adjustment will not exceed a pre-determined cap.

Why Home Buyers Choose It

If you plan to stay in your home for a short period of time and desire lower initial monthly payments, an ARM may be the right choice for you. Generally speaking, an ARM will allow you to qualify for a larger loan amount than that of a fixed rate mortgage. If you expect regular pay increases that would cover upward movement in future rates, an ARM may be a strategic financing toll for you to consider.

A balloon mortgage can be an excellent option for many home buyers. A balloon mortgage is usually rather short, with a typical term of five to fifteen years, but the payment is based on a term of 30 years. They often have a lower interest rate, and can be easier to qualify for than a traditional 30 year fixed mortgage. There is, however, a risk to consider. At the end of your loan term, you will need to pay off your outstanding balance. This usually means you must refinance, sell your home or convert the balloon mortgage to a traditional mortgage at the current interest rates.

Why Home Buyers Choose It

If you plan on staying in the home for a period which is shorter than the balloon term or expect to have the money to make the final payment at the time it is due, this may be a good option to consider.

A jumbo mortgage is a mortgage with a loan amount above the industry standard conventional loan limits. Jumbo loans refer to the loan size and typically offer similar options to conventional loans, such as fixed rates or ARMs

Why Home Buyers Choose It

If you need to borrower more than the conforming loan limit and prefer the convenience of a single loan, a jumbo mortgage is the right choice for you.

A combination loan, often referred to as a piggy-back loan, utilizes a first and second mortgage simultaneously. The first loan is usually made for 80% of the home’s value and has a first lien position, while the second loan is usually for 5-10% of the home’s value and has a second lien position. This loan program is commonly used to avoid paying private mortgage insurance or for those looking to finance more than the conforming loan limits.

Why Home Buyers Choose It

If you intend on putting less than 20% down, a combination loan may be the right financial choice. With no one loan exceeding 80% of the purchase price, you will avoid paying Private Mortgage Insurance (PMI). For those borrowers looking to borrower more than the conforming loan limits, the combination loan is a good alternative to jumbo loans. By keeping your first mortgage within the conforming limit and using a second mortgage to make up the difference, you can finance a jumbo amount without paying jumbo rates.

Home equity loans and lines of credit let homeowners borrow money by leveraging the equity in their homes. Your home equity is the difference between the home’s fair market value and the unpaid balance of all mortgages and any other outstanding debt against the home. The two most common home equity loans are fixed rate term loans and lines of credit.

Why Home Buyers Choose It

If you need quick and easy access to the equity in your home, you may find a Home Equity loan or line of credit excellent options. The interest paid on Home Equity loans is typically tax deductible (consult your tax advisor).

FHA mortgages are insured by a government agency, the Federal Housing Administration. The down payment requirements as well as the underwriting guidelines are more flexible for FHA loans. FHA loans are offered in both fixed and adjustable rates.

Why Home Buyers Choose It

If you are a first time homebuyer or anyone who prefers to make a smaller down payment, FHA financing may be the perfect solution. With easier credit qualifying guidelines, FHA loans are more attainable for those with limited or blemished credit histories.

VA mortgages are insured by a government agency, the Department of Veteran’s Affairs. Qualified Veteran’s can purchase a home with no down payment required. VA loans are offered in both fixed and adjustable rates.

Why Home Buyers Choose It

If you are a qualified veteran, a VA loan offers many advantages, such as no or low down payment requirements, easier credit qualifying standards and no mortgage insurance.

An alternative credit mortgage typically has more liberal underwriting guidelines than that of a conventional mortgage. The terms of the loan can vary from fixed rate to adjustable rate mortgages.

Why Home Buyers Choose It

If you have a less than perfect credit history or require a reduced documentation loan product, an alternative mortage may fit your needs.

Financing to build a new home typically comes in the form of a construction-to-permanent loan. This financing option has two parts: a loan to cover the costs of construction, and a mortgage on the finished (permanent) home. You can get both construction financing and the permanent mortgage with only one application process and one closing. Features include:

• Streamlined qualifying process
• Single set of closing costs
• Up to 12 months to complete construction
• Rate locked in at closing, with an option to "float down" to a new rate after construction if rates have improved
• Choice of fixed-rate or adjustable-rate mortgage
• Low down payment requirements
• Interest-only payments during construction

The Annual Percentage Rate (APR) , as calculated under the Truth-and-Lending Act, combines the interest rate (stated rate or nominal rate) with other costs of the loan into a single figure. This number is supposed to reflect the true cost of borrowing and provide a standardized yardstick by which to compare financing from different sources. Keep in mind that APR may be calculated slightly different at each lender.

Pre-qualification is based on your verbal application and no verification of income, employment, credit or value of home if performed. TheMIGroup Mortgage Resources will provide an opinion of your ability to purchase a home based on the information provided.

Pre-approval can be given once a full application has been obtained and credit has been pulled. This allows an underwriting decision to be made that you are conditionally qualified, subject to review of your completed application, credit check, appraisal and home inspection.

To ensure the interest rate you are quoted does not change prior to closing the borrower has the option to “Lock In” the rate. This is a commitment between the Borrower and the Lender that ensures a specified interest rate for your mortgage. A rate-lock commitment can be requested at any time prior to closing.

Once you decide to buy a house, you have to pay for an appraisal. The lender requires an appraisal as assurance that, if you default on the loan, the resultant foreclosure sale of your home will net enough cash to pay off your mortgage. An appraisal, should be provided by a licensed professional, and is an estimate of the value of the home you are purchasing. This should be one of the first things ordered in the loan process.

On conventional and FHA mortgages, the appraiser has 10 business days to return the appraisal. On VA loans, appraisals can sometimes take up to three weeks.

Appraisers use three approaches to evaluate the market value of real estate:

1. Comparative (market data) analysis, for single-family homes
2. Cost (summation) analysis, for public buildings and new construction
3. Income (capitalization) analysis for business and commercial property.

Comparative

The comparative approach, the most common, compares the recent sales prices of neighboring homes that are similar to the house being appraised. The appraiser first makes adjustments for variables such as size, number of rooms, condition, age and location. Then the appraiser evaluates environmental influences such as noise and air pollution as well as more abstract factors such as encroachments, zoning violations and easements. Although software is available to aid this process, appraisal is inexact and remains more of an art than a science.

The appraiser must reconcile the accumulated data and justify the assignment of a particular dollar value to the property. Appraisers typically round off figures because appraisals are only estimates of market value.

In any event, request a copy of the appraisal from the lender. If the loan falls through because of the appraisal, you are entitled to know why. If you do buy the house, keep the appraisal on file as a reference. If you decide to sell or refinance, you can compare it to the new appraisal.

Home Inspections

You have found a home and are ready to make an offer, you tell yourself: “I don't need a professional home inspection”.

Did you check for Lead paint, Radon gas, Carbon Monoxide? Are the Electrical, Plumbing and Sewer in order? Are there any structural problems, leaking roofs or rotting wood?

You can not always rely on word of mouth or the formal appraisal for reassurance about the house's condition. The appraisers often overlook mechanical and structural defects that are not readily apparent. An inspector that is working for you will find any of these concerns. Be sure to hire an experienced inspector that can provide references. The home inspection may cost a few hundred dollars but will ensure your dream home is worth the investment.

Finding the Right Inspector?

Inspectors can be found in the Yellow Pages under "Building Inspection," or check with your friends. Be sure to use a firm that's licensed and belongs to a nationally recognized association such as the American Society of Home Inspectors (ASHI). Make sure all fees are detailed upfront and exactly what the inspection will include.

We recommend you are present during the inspection and ask questions if something doesn’t make sense. You need to know all you can about the maintenance and repair of your investment.

What if Problems Are Found?

Problems are commonly found during the home inspection. While these are not always major they must be addressed with the seller. The seller should agree to fix the problem before closing, or to pay the cost of any necessary repairs. It is a good idea to get repairs made prior to closing but if this is not an option, the escrow company can hold back sufficient proceeds to guarantee payment. The buyer and seller usually negotiate through these developments, aided by lawyers and real estate agents, and the sale goes through.

Most sale contracts are contingent upon attorney approval and inspection. If seller and buyer can't agree on a resolution to problems revealed by an inspection, the deal may fall through.

Doing Your Own Inspection?

If you choose to do your own inspection you may later wish you hadn't. If this is your choice you must become a skeptic about every aspect of the home. Come up with a checklist (available from real estate agents, libraries and real estate publications). Know matter how good the home looks to your eye you may try to secure some protection; ask the seller to disclose known defects and to certify the condition of the home. You can always find a professional even after you have done it yourself. The best professional home inspectors carry with them years of experience and an assortment of specialized tools.

There are many types of insurance that will be discussed throughout the lending process but you will want to be sure you understand the types that protect you.

Homeowner's insurance is required by most lenders and covers your house, its surrounding property, its belongings and any liabilities resulting from fire, wind or other destructive force. You will need to discuss the specifics with your insurance provider.

Flood insurance is offered through the federal government under the National Flood Insurance Program (NFIP). The government manages the program because flood losses tend to be catastrophic, and private insurance companies cannot adequately measure the risk involved, according to the National Association of Independent Insurers. The policies are administered by the Federal Emergency Management Agency (FEMA), and are available only in communities that have met certain requirements. Even though it is a federal program, insurance agents are qualified to sell flood policies.

Title insurance protects both you the lender and is required by most Lenders. You will pay a one-time fee that will be part of your closing cost. Owner's title insurance protects you as the owner against any disputes over ownership of the property. Lender's title insurance covers the lender if there are any questions about ownership or liens against the property.

Private mortgage insurance (PMI) is paid by you to protect the lender from default that may occur. Most lenders require PMI if you have less than 20 percent equity in the home. If your down payment is more than 20 percent then will not have to purchase PMI. You can get PMI canceled form your loan when your equity (the difference between the market value of the house and the amount owed on the mortgage) reaches 20 percent.

The closing is usually the final step in the home buying process. The buyer and seller meet with brokers and lawyers to sign the necessary mortgage documents and transfer ownership of the home to you. The closing can be held a title company, trust or attorneys office. When all goes well, you will leave with house keys to your new home.

Know What the Purchase Price Includes

The sales contract should clearly spell out "conditions and content" of the property. But make sure you know exactly what is included with the house's purchase price. Bookshelves, drapes, custom lighting fixtures, fireplace screens, garden ornaments, outdoor barbecues and backyard play equipment are among the items that the seller will likely remove unless otherwise specified. This should be discussed in the initial purchase agreement but make sure that all details are discussed during the final walk through and document prior to closing.

Make Sure your Lender is Ready to Close

Verify with your Lender that all conditions to close have been satisfied. Banks sometimes issue a preliminary approval pending the various credit, debt and resource checks. An unresolved late payment on a credit report could forestall the loan approval and delay the closing.

Get a Copy of your HUD1

A final HUD1 is required by the Lender prior to closing. Be sure to review all fees and know what you are expected to bring to closing. Most Agents require certified or cashier's checks, rather than personal checks, for any additional costs that may be due at the closing.

Agents and Attorneys

These agents can be your friends through the process so pick your real estate agent and attorney carefully. They are responsible for the details of the deal, and will determine how smooth your closing will be.