Conventional Loans
A
conventional loan is generally defined as a mortgage
with equal monthly payments, 10, 15, 20 or 30-year
terms, and a fixed interest rate established when the
mortgage is created.
A conventional mortgage
is also defined in terms of its "loan to value" ratio or
LTV. An 80 percent LTV is the standard for conventional
loans, a percentage which means that if a house costs
$100,000, the lender will provide financing worth
$80,000 (80 percent of the purchase price) and the
borrower will put up $20,000 (20 percent). Closing costs
are EXTRA AND ADDITIONAL above the $20,000.
The qualifying ratio for
a conventional loan is usually 28-38% of income.
All conventional loans
with less than a 20% down payment are required to have a
PMI (Private Mortgage Insurance).
2006 Conventional Loan Limits
First mortgages
One-family loans:
$417,000
Two-family loans:
$533,850
Three-family loans:
$645,300
Four-family loans:
$801,950
Note: Maximum original
loan amounts are 50 percent higher for first mortgages
on properties in Alaska,
Hawaii, Guam and the U.S. Virgin
Islands.
Second Mortgages
Alaska: $312,750
FHA Loans
An
FHA loan is a federal assistance mortgage loan in
the United States insured by the Federal Housing
Administration. The normal fixed mortgage may be repaid
in monthly payments over 10, 15, 20, 25, or 30 years.
The
Federal Housing Administration is a federal agency
in the U.S. Department of Housing and Urban Development
or HUD. The purpose of the FHA is help lower income
families purchase housing.
FHA allows borrowers with less than perfect credit
to receive comparable interest rates to those with good
credit. FHA is not a lender but instead insures
mortgage loans made by private lenders. This insurance
minimizes the financial risk of the borrower to the
lender and allows the lender to offer a lower mortgage
interest rate.
FHA loans have low down
payment and closing costs, with the option to
use gift money from friends, family or other sources for
100% of the down payment. Flexible approval
requirements help people who have less-than-perfect
credit or lack a traditional credit history and expanded
qualifying ratios for people with low-to-moderate
incomes. In 2006, FHA received approval to offer hybrid
Adjustable Rate Programs (ARMs), in which the interest
is fixed for the first 3 or 5 years, and is then
adjusted annually.
FHA loans have no income
limit, instead they have lending limits. They allow you
to buy a home with as little as a 3% down payment. The
qualifying debt to income ratio for an FHA loan is
usually 29-41%.
The
downside is that an FHA loan may not offer enough
money if you need a large mortgage.
In addition, FHA loan have higher interest rates and
mortgage insurance premiums that are paid for the life
of the loan. Mortgage insurance premiums paid on an FHA
loan are typically equal to 2.25% of the purchase price
of the property with a renewal premium of .500% in
subsequent years. Compare this to the mortgage insurance
premium charged for a conventional program; typically as
low as .500% (with 10% down payment) with a renewal rate
as low as .300%.
2006 FHA Lending Limits – Anchorage, Alaska
One-family loans:
$255,050
Two-family loans:
$287,250
Three-family loans:
$349,050
Four-family loans:
$402,750
VA Loans
If you are a veteran or
qualify by military service you may be eligible for
a VA home. The VA Fixed Rate Loan gives borrowers the
option of financing their mortgage in 15, 20, 25, or 30
year terms.
VA mortgages, which are insured by the Department of
Veterans Affairs, make buying a home easier and more
affordable for veterans, reservists, and active-duty
service members. They offer some of the easiest
approval requirements of any mortgage, including:
♠
No down
payment requirement, so you can finance 100% of the
purchase price
♠
The option
to use gift money or secondary financing
♠
Flexible
credit requirements
♠
Expanded
qualifying ratios
♠
Origination
fees and closing costs are limited
A VA
funding fee of 0 to 3.3% of the loan amount must be paid
to the VA, and can be financed on top of the total loan
amount.
Should you try a VA home loan?
General Loan
Information
Fixed rate
loans are usually for 15 or 30 years.
♠
Pro:
Homebuyers can determine exactly how much they will pay
each month for the next 30 years.
♠
Con: Buyers
pay a premium for predictability as an FRM will
generally cost more than an ARM over the life of a 15 to
30 year home loan.
Tip: Get a
fixed-rate mortgage if stability is important or if you
have less confidence about the economy or job security.
An Adjustable Rate
Mortgage is a fluid loan where the interest rate
changes with fluctuations in the market. The first-year
rate (otherwise known as the teaser rate) is generally a
couple of percentage points below the market rate.
♠
Pro:
Because interest rates are lower for an ARM, it is
easier to borrow more. This can help first-time
homebuyers afford more home.
♠
Con: Rising
interest rates can create financial hardship if the new
monthly mortgage payment rises beyond the owner's
budget.
Tip: Get an ARM if you
expect to stay in a house for less than five years.
A VA Hybrid Adjustable
Rate Mortgage Loan is fixed for period of 3 or 5
years, and then adjusts annually thereafter. It allows a
1% annual interest rate adjustment after the initial
fixed interest rate period, and a 5% interest rate cap
over the life of the loan.
80/20 Mortgages:
so named because consumers actually take out two
mortgages – one for 80 percent of the home’s value, and
the other for the remaining 20 percent.
This
sidesteps the need for mortgage insurance
by getting a "piggyback loan" -- a second mortgage to
back up the first mortgage. The first and main mortgage
is for 80 percent of the home's price. The piggyback
loan is for 20 percent of the home's price, minus the
down payment, if any. If you see mention of an 80-15-5
loan, it means that the borrower got a main mortgage of
80 percent of a home's purchase price, a piggyback loan
for 15 percent, and made a 5-percent down payment.
Myriad combinations, such as 80-10-10, are possible.
Interest-Only Loans:
Comparatively risky, [but] increasingly popular, product
is the interest-only mortgage, where the buyer pays no
principle, typically for 5 or 10 years. Beyond that, the
interest rate fluctuates to the prevailing short-term
rate and borrowers start repaying principle on an
accelerated basis. These loans are popular among
homebuyers who simply cannot afford a big monthly
payment, and who are betting that their homes accumulate
in value during the interest-only portion of the loan.
If that happens, they can refinance after five years,
using the home’s increased equity as the basis for a
loan with better terms.
Second Mortgage Refinance
Options
♠
Option1:
Consolidate your debts and existing high-rate line of
credit with new Fixed Rate second mortgage.
♠
Option2:
Refinance your existing 2nd mortgage & your current 1st
mortgage with one low rate fixed rate mortgage
We at Diamond
Realty have been working
closely with Mr. Paul Hansmeyer, Mortgage Loan
Originator III of
First National Bank, Alaska. If you have any
further questions or wish to get started with the loan
process, please feel free to contact him at:
Paul Hansmeyer
101 W. 36th
Avenue, Ste. 216 P.). Box 100720
Anchorage, AK 99510-0720
Work: 907-777-5622
Fax: 907-777-5681
In Anchorage, there are
three main companies Diamond Reality and Paul Hansmeyer
deal with for loans. For more information, please visit
their sites:
Anchorage Neighborhood Housing Services, Inc.
480 W Tudor Rd
Anchorage, AK 99503
(907) 677-8491
Downpayment Assistance Program - Citywide
Downpayment Assistance Program - Targeted Neighborhoods
Cook Inlet Housing Authority
3510 Spenard Road, Suite
100
Anchorage, Alaska 99503
Tel: (907) 793-3000
Fax: (907) 793-3070
Email:
info@cookinlethousing.org
Municipality of Anchorage
– Department of Neighborhoods -
HUD
3000 C. Street, Suite 401
Anchorage, AK 99503
Phone:
(907) 677-9800
Toll-Free (in
Alaska only):
(877) 302-9800
Fax: (907) 677-9803
TTY: (907) 677-9825
Colleen Bickford, Office Director
Contact the Director's Office
Office Hours: 8:00 a.m. to 4:30 p.m.,
Monday through Friday
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