After finding the right home, it's important that you select the home loan that best fits your family needs and financial situation. At McCaffrey Home Mortgage, we have loan programs that fit virtually every buyer's budget. Here are a few loan programs to discuss with your Loan Consultant as we're with you every step.
Fixed Rate Mortgage Loan
A fixed rate home loan offers a set interest rate and payment amount for the full length of the loan, usually for 15 or 30 years. The fixed-rate mortgage loan is the "traditional" choice and is still the most popular because it offers stability and predictable monthly payments. Fixed rate mortgages are available in government, conventional and jumbo loan amounts, and are especially suited for those who expect to remain in their homes for a number of years.
Adjustable Rate Mortgage (ARM)
Adjustable-Rate Mortgages (also called ARMs) feature an interest rate that will periodically adjust with changing market rates. ARMs are available in government, conforming and jumbo loan amounts. The interest rate on these loans changes after a predetermined amount of time and the monthly mortgage payment adjusts accordingly. After a preset payment period (usually 1, 3, 5, or 7 years) the interest rate may adjust (usually semiannually or annually) on the basis of the movement in a specified index. As the interest rate adjusts, the mortgage payment will also adjust.
An FHA mortgage loan is insured by the Federal Housing Administration (a division of the Department of Housing and Urban Development). Although mortgage lenders provide the mortgage funds, the FHA sets underwriting standards for approving applicants. FHA underwriting guidelines are generally more lenient than conventional underwriting guidelines, enabling you to qualify for a mortgage loan with a lower down payment and a higher monthly debt allowance than with a conventional loan. However, you are limited to the amount you can borrow using an FHA-insured mortgage, depending on the county in which the property is located.
A VA mortgage loan is guaranteed by the Department of Veterans Affairs (DVA). VA loans are restricted to individuals qualified by military service. The main advantage of using a VA loan is that you can finance the purchase of a property with no money down up to the maximum loan guarantee. The DVA limits the types of loan programs it guarantees, and it will guarantee the more popular 30-year fixed and 15-year fixed loan programs.
CalVet offers a low interest rate for California veterans and an even lower rate for veterans who are first-time homebuyers who meet income and purchase price limitations, financial qualification and veteran eligibility of available bond funds. CalVet loan eligibility is lenient, so virtually any veteran wanting to buy a home in California is eligible.
A conventional loan is a private sector loan that is not guaranteed or insured by the U.S. government. It is also called a conforming loan as it conforms to the loan limits set by Fannie Mae (The Federal National Mortgage Association or FNMA) and Freddie Mac (The Federal Home Loan Mortgage Corp. or FHMLC), which currently is set at a maximum loan amount of $417,000 (as of January 2008). Typically a conventional loan requires a minimum five percent down payment.
A jumbo home loan is a purchase or refinance loan that exceeds $417,000 (as of January 2008) for a single-family home. It is also called a non-conforming loan as it does not conform to the loan limits set by Fannie Mae (The Federal National Mortgage Association or FNMA) or Freddie Mac (The Federal Home Loan Mortgage Corp. or FHMLC). Jumbo financing options include fixed-rate and adjustable-rate mortgages, and usually carry a higher rate than a conforming loan.
An interest-only payment option is offered on fixed rate or adjustable rate mortgages and allows you to pay only the interest portion of your monthly payment for a fixed period (i.e., three, five, seven or ten years). At the end of that period, your loan becomes fully amortized, resulting in increased monthly payments. The longer the interest-only period, the larger the new payment will be when the interest-only period ends. Interest-only payment plans may be the right plan for you if you expect to earn more in the near future.
Home Equity Line of Credit
A home equity line of credit is a revolving credit line secured by a 1st or 2nd trust deed on a home. These loans are often used to pay off credit card debt, buy a car, or make major renovations to a home. Minimum payments due each month are interest only. These loans work like a credit card, which can be paid down or charged up for the term of the loan.