Robert A Reynolds E-mail bob@nc-realtors.com
Visit Tami VanHoose, Directing Broker of The Property Emporium Inc.
Visit Irene Staton, Sales Manager of The Property Emporium Inc.
 |
|
|
THE NATIONS HOUSING
CENTER
The Buyers Guide To Real Estate By Robert A Reynolds Money and Financing What types of financing is available & how does the different types work? There are literally dozens of ways to finance a home. On the following pages are brief explanations of the most commonly used ones in this area. Your PROPERTY EMPORIUM NATIONAL RELOCATION SERVICE agent will be glad to give you more detailed explanations, help qualify you and help you compare the different types to find the best method suited to your individual VA - Probably the most used in this area because of our large military population. This is a government backed loan (guaranteed) but made through a lending institution. The interest rate is set by the government and is virtually always lower than the current conventional rate. You must have a certificate of eligibility to obtain VA financing 100%, with a 1% origination fee and a 2% funding fee (the funding fee may be paid in cash at closing or incorporated into the loan). These loans are 30 year, fixed rate and are completely assumable when you decide to sell (the buyer need not be a veteran to assume a VA loan). If you have already used your eligibility and perhaps allowed someone else to assume a VA loan you previously had, you still may have partial entitlement and be able to buy again with a nominal down payment, meanwhile getting the benefit of a lower fixed rate loan. The house will require a VA appraisal and a CRV (Certificate of Reasonable Value) will be issued - this is the amount VA will be willing to approve a loan for. If the CRV is lower than the sales price, there are these options: The contract will be void, however, the veteran can make up the difference in cash and a new contract entered into, or the sales price may be lowered to the amount of the CRV and a new contract entered into. Below is a sample of a VA loan at 7.5% interest on a house valued at $60,000: 2% VA funding fee $ 1,200. Loan amount $61,200. 1% origination fee $ 600. Monthly P.I.T.I $ 492. ASSUMPTION - The true assumption means that the buyer "assumes and agree to pay"the sellers loan. This is generally done because the seller's loan is at a lower rate of interest than the current market rate, thus giving the buyer the advantage of lower monthly payments than he could currently obtain. Not all loans are assumable, or if assumable the interest rate may "escalate"to a higher level than the original. Under new legislation, many loans that have traditionally been assumable can no longer be assumed at a fixed rate. In an assumption the down payment required will be the difference between the current loan balance and the sales price of the house. In certain circumstances the seller may help the buyer with the amount of down payment by "carrying"a portion of the down payment back on a Second Deed of Trust. OWNER ASSISTED FINANCING PURCHASE MONEY MORTGAGE - (Second Mortgage) The seller of the house lends the buyer enough to make up the difference between the purchase price and the down payment and the first mortgage balance. (A commercial lender may also make this kind of loan). The terms, including the interest rate are based on buyer/seller agreement. It is often a short-term (five to 15 years) loan; sometimes "interest only" payments being made until the term date when the balance of the loan is due. A buyer can then pay off the loan or refinance. WRAP-AROUND MORTGAGE - The seller makes a money advance that encompasses (or wraps) both the balance due on the old mortgage plus a "new" loan, at a below-market interest rate. (Commercial lenders may also offer this plan). The term of the "wrap" will be the time left on the old mortgage. OWNER FINANCING - Owners may finance first, second, third, or fourth loans. They may loan their equity back as a first mortgage (often called a "take back") or help the buyer in other ways. One form of owner financing (sometimes called a "balloon mortgage"based a monthly payment on a 30-year loan scale but requires the balance of the mortgage to be paid off at the end of a short period, three to five years. LEASE - PURCHASE - (Lease Option) The seller agrees to lease the home to the potential buyer for some period, generally a year or 18 months, when the buyer may purchase the house at a specified price. The buyer makes a deposit which may also be applied to the sales price, which may, on agreement, remain fixed. CONVENTIONAL FINANCING - In the past, conventional financing was a fairly standard thing, however, it is now sometimes anything but what most people would consider "conventional." There are many different types of conventional, institution assisted loans, some of which are listed below. FIXED RATE - This is the loan most people think of when they hear the term "conventional financing." This loan usually requires a down payment of five to 30 percent of the sales price, the interest rate is set at the time you obtain your loan and does not vary over the life of the loan. If your down payment is in excess of 20% you may not be required to have mortgage insurance. There is usually a minimum of paperwork involved and processing time is shorter than government backed loans. The interest rates will be current market levels (almost 1/2% or more above VA or FHA rates). Most of these loans are no longer assumable or are assumable only with an escalation of the interest rate to the new buyer. A borrower does have the advantage of sometimes being in a position of negotiating the interest rates and any loan fees as these are NOT government fixed but up to the individual lender. ADJUSTABLE RATE MORTGAGE - (ARM) The interest rate may go up or down over the years, and it is usually keyed to a financial market index. Interest rate increases are at the lender's option but rate decreases are mandatory. Monthly payments may also be adjusted on a periodic schedule. Many ARM's set a maximum adjustment on possible increases to interest rates and monthly payments, and/or overall floor or ceiling for the life of the loan. The initial rates if often lower than a conventional fixed rate loan. FHA - FEDERAL HOUSING AUTHORITY - Maximum loan amount for Cumberland County is $89,450. Minimum down payment is 3% of the first $25,000 plus 5% of the price above $25,000. For sales of $50,000 and below the minimum down payment is 3%. The buyer must pay prepaids (taxes and insurance). Closing costs can be financed into the loan amount. Mortgage Insurance is required. The Mortgage Insurance Premium is 3% of the loan amount after subtracting the down payment. In addition 1/2% annual premium is payable as a monthly escrow. Qualifying is based of two ratios: a) House payment ratio guideline is 29%. PITI including 1/2% monthly MIP divided by gross income. b) Total fixed payment ratio guideline is 41%. All monthly payments over six months, including house payment divided by gross income. NO investment or second homes are allowed. For more information on FHA loans please call your PROPERTY EMPORIUM NATIONAL RELOCATION SERVICE agent. FmHA - Farmers Home Administration Guaranteed Loan - Maximum loan amount for Cumberland County is $90,750. No down payment is required. Buyer must pay the .9% guarantee fee only; seller pays all closing costs and prepaids. Loans are limited to approved rural areas. Qualifying ratios are 29% PITI and 41% total debit ratio. Two year's employment and residence history is required. No refinancing is allowed. No mobile or modular homes. Must be owner occupied. NO ACTIVE DUTY MILITARY personnel are allowed to use this program. This program does have income limitations: One person two persons three persons four persons five persons $25,200. $28,800. $32,400. $36,000. $38,900. For more information on this program call your PROPERTY EMPORIUM NATIONAL RELOCATION SERVICE agent. THERE ARE MANY OTHER TYPES OF FINANCING, SUCH AS SHARED EQUITY LOANS, VARIABLE RATE MORTGAGES, BUY-DOWN MORTGAGE PLANS, FNMA RESALE MORTGAGE PLANS & GROWING EQUITY MORTGAGES, YOUR PROPERTY EMPORIUM NATIONAL RELOCATION SERVICE AGENT IS ONE OF THE BEST SOURCES FOR INFORMATION ON THOSE LOCALLY AVAILABLE. CONTACT US BELOW OR E-MAIL (info@nc-realtors.com.)
|
|
Contact Us