Mortgage Options For Today’S Home Buyer


It has been reported by the media that the younger generation is shying away from home buying so they can remain mobile if opportunities arise and out of trepidation because of the recent history of the real estate market.

Many of us think they are missing a lifetime opportunity because of today’s combination of historic affordability of homes and historically low interest rates.

Loan programs that contributed to the current housing situation, such as so called liar loans (stated income) and negative amortizing ARMs (adjustable rate mortgages) have disappeared.

Below are types of loans, with interest rates as low as 3.5 percent, that are available to today’s home buyers.

Conforming loans — These loans generally require at least 10 percent down and offer fixed interest rates for any number of years; such as 10, 15, 20, 30 and even 40.

In addition, there are other types of loans such as the 10/1 ARM, 7/1 ARM, or a 5/1 ARM. These types fix the interest rate for a preset number of years and at the end of the fixed term they roll over into a one-year adjustable rate mortgage where the interest rate can change once a year within predetermined limitations. For example, a 10/1 ARM would have a fixed interest rate for 10 years and at the end of the 10th year the interest rate will be recalculated and continue to be recalculated every year thereafter.

ARMs normally have a lower interest rate than 30-year fixed rate loans.

A conforming loan currently allows the mortgagor to borrow up to $417,000.

Jumbo loans — These are loans in excess of $417,000 and generally have a slightly higher interest rate than conforming loans. They are available in either fixed or adjustable interest rate mortgages.

FHA loans — These are also known as government loans and have replaced conforming loans as the most popular type of loan today. This type of loan has been around since 1934 and was originally formulated to assist recovery from the Great Depression. Many first-time buyers use this type of loan because of lower down payment requirements (3.5 percent) and more relaxed standards on credit scoring. The interest rate is usually slightly higher than a conforming loan rate.

USDA Rural Development loans — This type of loan is for rural areas and allows zero down payment if the borrower and property qualify. All of Rim Country is considered rural for this loan type. This loan is guaranteed by the United States Department of Agriculture and is beneficial to first-time home buyers.

VA loans — These loans are insured by the Veteran’s Administration and follow a set of specific guidelines set by the VA. Veterans may get home loans with no money down at rates comparable to FHA loans.

FHA 203K loans — This loan program provides mortgage to purchase a home that is in need of rehab. It not only provides capital to purchase the home but will also finance the needed improvements.

If a home is in your near future, it is imperative to get pre-approved for a loan prior to making an offer on a home. Realtors can refer you to qualified, licensed lenders in our area who can educate you on the best loan program for your situation.

Ray Pugel is a designated broker with Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.


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