The Ultimate Guide To Mortgage Types | Boca Raton Mortgages
With the hubbub around our economy constantly hovering over our record-shattering real estate market, it's important that we know the fundamentals. With the feds raising interest rates and mass speculation around our surging prices, low inventory, and unique circumstances, we dedicated ourselves to writing about, and explaining the most common home mortgage types you're likely to come across in your Boca home search. With the help of our superb partners at supreme lending, we have access to dedicated professionals who are always on top of the latest news and changes to mortgage law. Read on and learn from our ultimate guide to mortgage types and see if these choices are right for you.
30 Year Fixed Rate Mortgage
A 30 Year fixed rate mortgage is as it sounds. Of the two major types of mortgages (fixed and adjustable rate), this is the most commonplace and usually the preferred financial product for first time homeowners.
15-Year Fixed Rate Mortgage
A 15-year fixed rate mortgage is a much greater risk to default, but in hindsight appeared to some to be the better mortgage as opposed to the 30-year variety. While the upfront costs are vastly higher, the lack of time for interest to compound usually ensures the final cost is much lower. Without the additional 15-year term to accrue, this is a great option for those without heaps of cash but the expectation to easily afford their monthly payment.
Adjustable Rate Mortgage
An adjustable rate mortgage is an oppositional companion to the more commonplace fixed rate. An adjustable rate mortgage or ARM is now back in the forefront as a major consideration of new homeowners. The floating rate begins normally begins with a 3-10 year fixed grace period, sometimes below the federal rates. This allows homeowners to build their financial reservoir before the inevitable adjustments, almost all of which are increases, during the life of the loan.
The FHA, or Federal Housing Administration, is a government bureau specializing in the pursuit of affordable housing for low and middle-income families. The loan is provisioned via a government-approved bank and often requires a lower-than-usual down payment than most conventional loans.
Investor Cash Flow
The Investor Cash Flow Mortgage Program (CFMP) is an alternative that is gaining steam in investor circles. Rather than approving the loan through the traditional method (personal income), this program wields the simple relationship between the mortgage payment and cash flow of a given property to dispense a loan. The lenders use a simple equation to determine the loan amount: DSCR = Income / Payment.
Much like the FHA backs their loans, the VA, or Veteran's Affairs, is a mortgage allotted specifically to military servicemen and women. As a provision of military service, the VA offers guarantees to private lenders that handle VA loans, ensuring the lender has ample room to offer significant benefits to the veteran. Thanks to their service, these loans often require little to no down payment, and are not as stringent as other loan programs.
The U.S. Department of Agriculture reserves a special mortgage program for rural families who may be particularly impoverished - insofar as they may be limited in their access to basic necessities such as heating and even running water. While not a conventional mortgage of something Champagne & Parisi ever deals with, it's helpful to those in need and there when they need it most.
A jumbo mortgage is a higher-risk mortgage solution for those who can afford them. Jumbo mortgages are for jumbo wallets, and are designated as such since they are in excess of Fannie Mae and Freddie Mac's limitations. These are allotted to the wealthy and financial stable to cover larger properties, normally at a minimum of $650,000.
Interest Only Mortgages
An interest only mortgage is a fascinating use of the ARM product in that it requires (as the name suggests) payments of interest only for the designated period. While this provides a massive advantage during this time by reducing the overall payment by the principle, this also means a sizable jump in payment size when that period ends, along with the lack of equity buildup in the property during this time.For More Real Estate Insights and Industry Details - see below...4 Traits To Look For In The Right Real Estate Broker6 Ways To Stand Out As A Realtor