Fixed-rate mortgages feature a fixed percentage rate and loan amount, so the monthly payment is the same every month for the entire length of the loan. Because of the loan’s stability, this is the most common type of mortgage for first-time homebuyers.

Important benefits of fixed-rate mortgages include:

• The monthly principal ind interest payment will not change over the life of the loan
• The interest rate will not change, even if market rates go up
• Knowing monthly mortgage expense in advance makes household budgeting easier

COMMON FIXED-RATE MORTGAGES INCLUDE:

30-Year Fixed:

These loans allow home buyers to borrow more money for the same monthly payment than do shorter-term loans. They may also make possible a lower down payment, because the down payment has less impact over the full life of the loan.

15-Year Fixed: 

These loans generally require a higher monthly payment and down payment than their 30-year counterparts, and may be better suited for lower-priced homes. Since the term of the loan is half as long, the borrower gains significant savings on the total amount of interest paid on the loan.

Adjustable-rate mortgages (ARMs) have a variable interest rate and monthly payments that are recalculated on a regular basis to reflect changes in the market interest rate.The initial rate on an ARM is fixed for a specified period. The shorter the initial fixed period, the lower the initial rate can be. The lower rate reflects the fact that the lender assumes less risk of potential increases in the market interest rate, and the borrower isn’t paying for interest rate protection that he or she doesn’t need. This translates into a lower monthly payment than for a similar-term fixed-rate mortgage.Important benefits of adjustable-rate mortgages include:

• Interest rates that are typically lower than those of fixed-rate mortgages
• More money can be borrowed than with a fixed-rate mortgage
• If interest rates fall, the borrower benefits
• Useful in situations where unpredictable interest rates make fixed-rate mortgages difficult to obtain

A notable disadvantage of ARMs is that they expose borrowers to the risk that market interest rates may rise in the future, resulting in increased monthly mortgage payments.

The Federal Housing Administration (FHA) offers FHA-backed loans that are designed to help increase home ownership by low- and moderate-income families and first-time homebuyers. Because the FHA insures the loan, lenders can offer greater flexibility in lending guidelines.Available for single- and multi-family homes, FHA loan financing options include traditional fixed-rate products, adjustable rate mortgages and temporary interest rate buy-downs.Important benefits of FHA-insured loans include:

• Low down payment
• Minimal closing costs
• More flexible credit-qualifying guidelines
• No income limits
• Higher debt ratios allowed
• Less stringent job requirement guidelines

The U.S. Department of Veterans Affairs (VA) offers VA-backed loans to veterans, active-duty personnel, reservists/National Guard members and some surviving spouses. When the loan is approved, the VA will guarantee part of it. The amount of the VA’s guarantee usually depends on the size of the loan.A VA-guaranteed loan can be used to buy a home, manufactured home or condominium; buy a lot for a manufactured home; build, repair or improve a home (including energy-efficient improvements); or refinance an existing loan. These loans can also be used for rate and term refinancing or cash-out refinancing of a primary residence.Important benefits of VA loans include:

• Little or no down payment required
• Competitive interest rates
• Easier qualification requirements
• Borrower does not have to pay for private mortgage insurance

U.S. Department of Agriculture (USDA) mortgage loans are offered in rural areas to help lower-income households gain access to home loans at reasonable mortgage rates.Property types eligible for USDA loans include single-family homes, condominiums and manufactured housing on a permanent foundation. Eligibility requirements vary depending on property location, and these loans are offered only to individuals whose income is below rural-development county limits based on the number of members in the household.Important benefits of USDA mortgages include:

• No money down, and up to 103.5% financing
• Available for purchase and no-cash-out refinances of primary residences
• Gifts and/or grants are allowed for closing costs
• Borrower’s closing costs may be paid by the seller or financed into the loan amount

A conforming loan is a mortgage that is equal to or less than the loan limit set annually by Fannie Mae or Freddie Mac, the government-sponsored agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders. The current conforming loan limit for a single-family home or condominium in most areas of the country is $417,000, with higher limits allowed for designated high-priced markets.The terms conforming and conventional are often used interchangeably. Mortgage loans that are higher than the conforming loan limit are called jumbo mortgages or nonconforming loans.

Jumbo mortgage loans are designed for homebuyers who need to finance especially large purchases. A loan is considered jumbo if it exceeds the “conforming” loan limit set annually by Fannie Mae and Freddie Mac, the government-sponsored agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders.The current conforming loan limit for a single-family home or condominium in most areas of the country is $417,000, with higher limits allowed for designated high-priced real estate markets. Jumbo loans are available for primary homes, secondary or vacation homes, investment properties and condominiums.A variety of jumbo loan options are available, such as 30-year fixed mortgages, adjustable rate mortgages, and VA loans.Important benefits of jumbo mortgages include:

• The ability to purchase a home in a high-priced area
• Relatively low down payment requirements if salary is high
• Ability to rapidly build credit through regular loan payments

A reverse mortgage enables homeowners age 62 and older to convert part of the equity in their primary residence into tax-free cash without having to sell their home or give up title. It is a low-interest loan that uses a home’s equity as collateral. It is called a reverse mortgage because rather than the homeowner making monthly payments to a lender, the lender makes monthly payments to the homeowner.The reverse mortgage process includes important consumer protections, such as a requirement that the borrower talk with an independent third-party loan counselor before securing the mortgage. This helps ensure that borrowers understand the program and have reviewed alternative options.Important benefits of reverse mortgages include:

• They enable homeowners to access home equity without making monthly payments
• No income or medical requirements
• Borrower’s name stays on the title of the house
• Money can be received all at once, in fixed monthly payments or as a line of credit
• Loan income has no impact on regular Social Security or Medicare benefits

HomePath Mortgage allows a buyer to purchase a Fannie Mae-owned property with a low down payment, no lender-required appraisal and no mortgage insurance*. Expanded seller contributions towards closing costs are allowed. Available for owner occupants and investors.

Benefits of HomePath Mortgage:

• 3% down option that can be gifted from a close blood relative (owner-occupant only)
• Flexible mortgage terms with fixed rate options
• You can have as low as a 660 credit score
• You can get financing as an investor with 10% down
• No appraisal required
• No mortgage insurance*

Home Affordable Refinance Program (HARP)The Home Affordable Refinance Program (HARP) is designed to assist homeowners with good credit standing, to refinance their mortgages – even if they owe more than the home’s current value. This offers an option for “underwater” homeowners who owe more than their home’s current value.The goal of this program is to put responsible borrowers in a better financial position by:

• Reducing monthly principal and interest payments
• Reducing interest rate
• Reducing the amortization period
• Moving from a more risky loan structure to a more stable product

These affordable refinance opportunities are offered to homeowners with an existing loan that was purchased or pooled by Fannie Mae (FNMA) prior to June 1, 2009. To determine if you have a FNMA loan, visit: https://www.knowyouroptions.com/loanlookup

The advantages of this program are:

• Financing for homes with up to 135% loan to value (LTV)
• Unlimited combined loan to value (CLTV) or high combined loan to value (HCLTV) for borrowers with second mortgages. This is calculated by:

• Minimum FICO scores as low as 620
• Desktop Underwriting (DU) requiring less documentation
• Jumbo-Conforming or high-balance loans in high-cost loan areas may qualify