Home Loans........
More Mortgage Info
for the Faint of Heart!
REinfo4me.com
The dreaded home loans maze; don't worry, read on and you will have the courage to get through it!
We have looked at the terms and types of home loans, now we have to examine the features of mortgages!
Conventional Conforming: This used to be the only game in town.
You would save up your 20% down payment and apply at your local bank for a loan on your home.
Nowadays, a conventional loan really means one that meets "Fannie Mae" guidelines and is for less than $417,000 for a single family dwelling (in most of the U.S).
Loan limits for Alaska, Hawaii, Guam and the U.S. Virgin Islands are 50% higher.
The reason for meeting Fannie Mae guidelines is that these types of home loans are easily sold on the secondary market, thus replenishing the financial institution's coffers so they will be able to make more loans.
Fannie Mae is an acronym (name made up of letters in the name) for a Government charted institution that buys FHA loans and guarantees purchase of all home loans that meet their guidelines.
"Freddie Mac" is another institution which also purchases real estate mortgages.
Freddie Mac guarantees loan repayment on home loans meeting it's guidelines, so lenders can choose to hold the mortgages themselves or resell them.
If a borrower defaults, Freddie Mac assumes the loan and repays the lender.
Jumbo Conforming: As the name indicates the loan amount is over the Fannie Mae guidelines and the loan is therefore not as easily saleable on the secondary market.
Jumbo home loans have a higher interest rate than conventional loans.
FHA: Home loans insured or guaranteed by the Federal Housing Administration provide a good financing option for borrowers, such as first-time homebuyers, with good credit but little or no money for a down payment.
FHA amounts vary depending on the area.
Here is a link to determine HUD loan limits.
FHA down payments are approximately 4% of the purchase price.
The house must be appraised by an FHA Appraiser.
The appraiser must also make a comprehensive appraisal of the condition of the house and must note any significant defects.
If significant defects are found, then a full inspection is recommended.
FHA borrowers must also pay MMI (mutual mortgage insurance).
VA Loans: There are Government backed home loans available to Qualifying Veterans with no down payment.
Click for more info on VA loans
Impound Accounts: These are typically required with loans that are more than 80% loan to value (where you have made a down payment of less than 20%) and for most government funded loans.
This means that your real estate taxes and homeowners insurance payments are included in your monthly mortgage bill and kept in an "impound account" until they are due and paid by your lender.
PMI/MMI: Private Mortgage Insurance or Mutual Mortgage Insurance is an extra payment required up front AND monthly by your lender if your loan is more than 80% loan to value.
PMI must be removed by the lender when your original loan reaches 78% loan to value, but you may have to ask them to do it!
Mortgage insurance (MMI) on Government home loans is never removed.
Points: One point equals 1% of the loan amount, not the purchase price.
Points are really pre-paid interest.
Paying one point drops your interest rate by approximately 1/8%.
"Points" can also be charged as part of the application or loan origination fee.
RESPA: The Real Estate Settlement Procedures Act requires you lender to give you a good faith estimate of your purchase closing costs within three days of your loan application.
This is only an estimate! you must receive a HUD 1 statement of your actual costs at least one day prior to closing.
Enough already, where do I get a home loan and how much do I have to put down?
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