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Finance Information

What about financing



Obtaining a mortgage is one of the most important steps in the home buying process. In fact, it is so essential that we energetically counsel all of our potential buyers to become pre-approved for a mortgage before they begin searching in earnest. With this knowledge in hand, a buyer can then move forward confidently, identifying and targeting a very specific price range in the market from which to select.

Pre-approval also plays another vital role. In the eyes of someone selling a property, potential buyers who are pre-approved are seen as more desirable. So, in a situation where there are multiple offers placed on a property, some with and some without pre-approval, that factor alone can have a dramatic impact on how those offers are considered.

For your information, we recommend that you read the brief outline provided at this site of the many types of mortgage products available to assist you in your quest of the right financing. It is strongly recommended, however, that a lender be contacted directly so that he/she may tailor a plan fitting your own personal financial goals.



Step One - Choosing a Lender
Certainly while going to your daily banker is a viable option, it is not always the best one. There is a distinct difference between a bank and a mortgage company. Mortgage companies often provide and offer more resources and can therefore provide you the customer a great variety of products and plans to choose from. They can tend to be more flexible in their credit requirements as well.

Step Two - Ask the Right Questions
Important questions you must ask! Lenders do vary not only in interest rates, but in their closing costs. You might be dazzled by the interest rate, but look to the fine print to see what upfront closings costs will be. They might be giving you a lower rate, but making a large profit from you in upfront fees. Always, always require a Good Faith Estimate to be sent to you.


A Good Faith Estimate is a comprehensive form where the lender discloses exactly all the costs involved which include estimated taxes, anticipated payment and cash needed to close on the house. It will also explain in detail the type of loan, interest rate and all costs associated with selecting a loan. Warning! Do not write any check to a Lender for any processing fees until you have been provided with a "Good Faith Estimate".

In your first phone conversation with a lender, you will provide him with some necessary bits of personal information, such as: income, current debts, credit card payments, and job history. The lender will take this undocumented information and form a general opinion as to your personal ability to purchase a home, and project what you can afford. This process is known as being "pre-qualified".

When you formally select a lender, they will formally document your personal information, which could take up to 2 weeks, at which time you will be considered "pre-approved" and ready to purchase a home.


Questions to ask:
What is the current interest rate?
What is your loan origination fee?
What are my closings costs for this loan?
What is your timeline for processing my loan?
Can you send me a Good Faith Estimate and explain it to me.


Types of Financing


Fixed Rate Mortgages:

Fixed rate mortgages are loans where the interest rate for your mortgage stays the same for the entire term of the loan. Fixed rate mortgages are available in 10, 15, 20, 25 and 30 year terms. Generally, the longer the term of the loan the higher the interest rate. Fixed rate mortgages are great loans for clients who anticipate staying in their home for a longer period of time. With a fixed rate mortgage your interest rate and principal and interest payment will never change. Fixed rate mortgages are also available for construction loans.

Adjustable Rate Mortgages (ARM):

Adjustable rate mortgages are loans where the interest rate on your mortgage is subject to change at some point during your loan term. Adjustable rate loans are available with repayment terms of 30 years. However, the interest rate on your loan may only be fixed for a period of 1, 3, 5 or 7 years depending on the option you choose. For clients who will be staying in their home for a shorter period of time an adjustable rate may offer a lower payment and interest rate. An ARM may also benefit you if fixed rates are higher and you anticipate mortgage rates to drop within the next couple of years. This allows you to keep your payment reasonable while you wait for fixed rates to decrease. ARM mortgages are also available for construction loans.

Balloon Mortgages:

Balloon mortgages are loans that generally carry an interest rate lower than a fixed rate mortgage. With a Balloon mortgage you have a 7 year term in which to pay your loan off in its entirety or to refinance. Balloon mortgages have low monthly payments because your monthly payment is calculated over a 30 year term. However, at the end of 7 years you will have to payoff your outstanding balance at that time or refinance. A balloon option is good for clients who will be moving within 7 years or those who are betting mortgage rates will be decreasing during the next 7 years. Balloon mortgages are not available for construction loans.

Construction Mortgages:

Unlike most mortgage products, construction loans can vary widely from lender to lender. There are few lenders that offer a construction-permanent mortgage. This saves time and money, and allows you to lock into your interest rate before you start construction. This gives peace of mind during construction. With a lender who offers such a plan, you will know exactly what your rate and payment will be before you even start your home. This also gives you peace of mind when rates are rising. If rates are lower upon completion of your home, you can refinance to the lower rate at that time.

First Time Buyer Programs:


First Time Buyers have numerous options available to them. There are FHA/VA and Michigan State Housing Development Authority programs. Many of these options allow for NO money down. Best of all, they offer expanded guidelines which makes it easier to qualify for a mortgage.

Executive (Jumbo) Mortgages:


Executive loans are mortgage loans in excess of $333,700. These loans typically range from $333,701 to $1 million dollars. Like construction loans, these products can vary significantly from lender to lender.

Lot - Vacant Land Mortgages:


Some loan programs are available with as little as 10% down (depending on your credit history). Programs are offered that feature attractive adjustable rates. Lot and land loans have a repayment term as long as 30 years, with your rate being fixed for the first 1, 3 or 5 years depending on the option you choose. Land financing is available to those clients who anticipate building a new home on the land they are purchasing.

Bridge (Swing) Mortgages:


These mortgage options are used when you currently own a home and need to close on the purchase of a new home before you close on the sale of your current home. Bridge loan options may allow you to borrow up to 90% of your current homes value for your down payment on your new home. Best of all there are flexible payment options that allow you to make interest only payments monthly or quarterly depending on the option you choose. In many cases, your new bridge loan payment will not count against you when you qualify for your new mortgage. This makes it easy to qualify for your new home without selling your old home.

 

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