Financing Info

Selecting Financing

Fixed Rate Mortgage Loans:

Fixed rate mortgage loans are one of the most popular financing options available. The basic benefit is the security of knowing you'll have the same monthly principle and interest payments from your first until your last payment.
Fixed rate loans are available for a variety of terms, from 10 to 30 years. Many borrowers choose the traditional 30 year term because it offers the lowest monthly payment, but you may also benefit from a short term loan. Although your monthly payment will be higher with a shorter term loan, your total interest over the life of the loan will be reduced substantially and your home equity will increase faster since the loan is paid off sooner.
Typically, shorter term fixed rate mortgage loans also have lower rates than comparable 30 year fixed rate loans.

A few of the reasons fixed rate loans are attractive:

Adjustable Rate Mortgage Loans (ARM):

With an adjustable rate mortgage loan, your interest rate is subject to change on a regular basis, based on market conditions and the kind of ARM you have. Some ARMs have rates that adjust annually, others adjust every few years. There are a variety of terms available for ARMs to suit your needs.
ARMs offer many benefits, including an interest rate that is usually lower than a fixed rate loan, and limits on how much the interest rate can be adjusted at one time. Some ARMs even offer the option to convert to a fixed rate loan in the future.
Some home buyers choose ARM loans because of the lower initial rate, they can qualify for a larger loan amount than would be possible with a fixed rate option. They may also be planning to be in their home for only a few years, in this case the ARM can save you money.
Finally, some buyers choose an ARM because the anticipate that their income will grow over time. An Arm will give people in this situation the security of a lower monthly payment during the early years of the mortgage, making their home purchase more affordable.

A few of the reasons fixed rate loans are attractive:

Balloon Loans:

If you plan to live in your home less than 7 years, you might want to consider a balloon loan. These short term loans offer payments amortized over 30 years, giving you a short term fixed rate loan with a a manageable monthly payment. Interest rates are generally lower than fixed rate loans with longer terms.
With balloon loans, repayment of the full mortgage loan amount is required at the end of the term. This usually happens a result of the sale of your home. If you decide to remain in your home, you may be able to refinance your home under another program.

Contract for Deed Loans:

A contract for deed is a loan between the buyer and seller and is therefore usually unique in many ways. Contract for deed loans almost always have one or more balloon payments involved. In fact, the deed to the property remains in the seller's name until all payments are satisfied or the buyers establish a standard mortgage through a financial institution of their choice.
A contract for deed usually requires a down payment of 20% of the purchase price. Contract for deed can be risky because if the terms are not met, the buyers can lose the home and all money they invested.

Processing, Approving and Closing Your Loan

Processing Your Loan:

Once your application is complete, your loan processor reviews the file to make sure all of the required documents and information are included and accurate. The loan processor will:
Verify the information by contacting financial institutions listed on your application and employers to confirm that all of the information provided is complete and accurate.
Obtain a credit report from a reliable reporting agency that outlines how you've handled payment of debts such as credit cards, auto loans, school loans, ect.
If you've already found a house, arrangements for an appraisal will be made. If you've applied for a loan before house hunting , this process will be completed as soon as you've identified a property.
As the documentation described above is being processed, it's possible that additional information will be needed. If this is the case, you will be contacted. A prompt response will help the processing time to a minimum.

Approving Your Loan:

After the documentation is received, the loan processor will forward your completed file to an underwriter. The underwriter will analyze all of the information in your file using industry accepted guidelines to determine whether you can reasonably be expected to repay the loan amount requested and whether the property you have chosen provides adequate security for a loan. As soon as your loan is approved, you and/ or your REALTOR will be contacted by phone with the details, including the interest rate, term and monthly payments.

Closing Your Loan:

Once the loan is approved, your REALTOR or the loan officer will contact you to set a convenient time and location for the closing. You will be provided with a list of items which you will need to bring with you to closing.

On Closing Day, bring these items with you:

A photo ID
A list of your addresses for the last 10 years
A certified or cashiers check, made payable to yourself, for the amount specified in your recent "Good Faith Estimate" you received from your loan officer or lender. This usually includes the balance of your down payment minus the earnest money you paid when your offer was accepted, and fees for other services.
Your personal checkbook so if other charges come up, you can write a check to cover them.
Your new homeowner's/hazard insurance binder with proof of one year payment (usually a receipt).

Several people will probably attend the closing, including you, your REALTOR, the seller, the seller's REALTOR, attorney(s) representing you and /or the seller, and a closing representative.

During the meeting, which usually takes about an hour, you and the seller will review all relevant closing papers, many of which you will sign. Some of the documents presented at closing are:

Mortgage note: This states that you as the buyer will pay back the entire loan amount to the lender, plus interest at the note rate.
Mortgage or Deed of Trust: This pledges the real property being purchased as security for the debt.
Loan Settlement Statement (HUD-1): This provides a breakdown of all costs that must be paid by you and the seller. (Required by Federal Law)
Truth-In-Housing Disclosure: This provides important information about the loan, including the annual percentage rate. (Required by Federal Law)

Toward the end of the meeting, the title to the property you are purchasing is legally transferred from the seller to you. You are now the proud owners of your new home!