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Q: What is an FHA loan?
A: An FHA loan is a real estate mortgage. The mortgage is insured by FHA. Since the FHA insures these mortgages, lenders can work with borrowers even when they've had credit problems, accounts forwarded to collections, past bankruptcy filings, or debt-to-income ratios that are higher than normally allowed.
Q: What is the APR and why is higher than the interest rate?
A: Interest rates are only part of the story of the cost of a loan, there are loan origination fees, broker fees, recording charges, discount points and possible other charges depending on the state, county or type of loan. When these charges are factored into the loan you are paying a higher rate, so that 4.00% rate might be an APR of 4.1%. There are other fees that you may be charged out of pocket and you can pay the loan fees and discount points out of pocket to maintain an APR equal to the interest rate, but that may not be an advantage for your particular case.
Q: What if I have “bad credit” or filed a bankruptcy?
A: “Bad credit” is a very misleading term. Of course, the credit score gives a lender a snap shot of how well you will be able to repay the loan. Some loans are available for low scores, but there are often extra finance costs or higher interest rates especially if the LTV (loan to value) of the property is high. You can improve your credit by 1) paying on time your credit cards, utilities, rent etc. 2) checking the credit reporting agencies to make sure that there are no mistakes in your file and 3) having 'seasoned' money in accounts (like savings, so that the lender knows you have assets to pay in the event of a financial emergency). A bankruptcy can make getting a loan harder, but if it has been a couple of years since the bankruptcy was finalized and you have shown good financial behavior, paying on time, keeping your debt to income ratio low and building savings, there are programs available.
Q: Which houses/properties qualify for an FHA loan?
A: Single family houses, duplexes, triplexes, 1-4 unit primary residences, Planned Urban Developments (PUDs), approved condominiums, double-wide manufactured homes, and modular or pre-cut housing are all eligible. Please note that some conventional loans are also available for these properties.
Q: Isn't the lowest interest rate the best loan?
A: While it is true that one wants a low interest rate, sometimes the interest rate is only part of the picture. For instance an FHA loan may have a monthly payment that is higher than a Pay Advantage loan although the interest rate of the FHA loan is less. The reason is that you pay mortgage insurance each month for your FHA loan, while the Pay Advantage loan has adjusted the insurance in a higher interest rate. You pay less each month. Call Ampak Real Estate and Loans today to see what types of loans you qualify for and what benefits each can give you in your goal towards home ownership.
Q. Compare a 30 year loan versus a 15 year loan or 10 year loan?
A. The shorter the loan period the less interest you will pay for the loan over the lifetime of the loan, but you will also pay a higher monthly payment to pay off the loan in the shorter loan period. The benefit for a borrower is that a 30 year loan will allow them to make smaller monthly payments. Since most people do not keep a loan for the entire 30 year period (7 years being an average loan length) before selling or re-financing, the borrower may find smaller payments very attractive. If you are re-financing and have already paid on your home for several years, you may want a shorter term even with higher monthly payments. The shorter term loans generally have a lower interest rate, but the APR may appear higher in comparison as finance charges plus interest rate determine APR over a shorter time span.
Q. How much time does it take to close a loan?
A. If all information is provided with the loan application and there are no special circumstances, loans generally at this time and depending upon the type of loan, close in 3 weeks to 2 months. The better and faster the documentation is provided, the quicker the loan can be processed.
Q. Why should I re-finance my home?
A. 1) If you are upside down and one of the homeowners who through no fault of their own became so and your mortgage is owned by Fannie Mae, the government H.A.R.P. program can help you. You cannot be paying mortgage insurance on the loan and until late March or even April 2012 (depending on the speed Fannie Mae adjusts the rate) the LTV for the re-fiancing can not be greater than 125%. If you fall in this category or if the LTV is more than 125% and you can maintain payments for a little while longer, you may qualify for a re-fi that has payments that are easier to make.
2) If you have a high interest rate, the new lower rates may save you money or provide a more affordable monthly payment.
3) If you have equity in your home and it needs some TLC or improvements to accommodate life changes such as a growing family or modified fixtures for a less mobile occupant, a new re-fi may be the answer.
Q. What is the debt/income ratio?
A. The debt/income ratio also called DTI is used to determine what percentage of your income is used to cover debt. Depending on the type of loan you will need different ratios. For example, a conventional loan may require a 28/36 ratio. This means the first number called the Front end is the percentage of income that goes to housing costs. For a renter that is the rent, for a homeowner it includes the mortgage principal, mortgage interest,, hazard insurance premiums, property taxes, possible mortgage insurance premiums and homeowner association dues. In this type of loan the total can be more than 28% of your income. The Back end is the percentage of your income that pays your recurring debts and includes the housing costs, credit card payments car loan payments, student loans, child support or alimony and legal judgements. In this case the total cannot be more than 36% of your income. With a VA loan, the requirements are neither the Front end or the Back end can exceed 41 (although they might not phrase it that way). For an FHA loan in 2012 it looks to be 29/41 in the past it has been 31/43.
Do you have additional questions? Contact Ampak Real Estate and Loans to learn more!
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Disclaimer:
1. Mortgage Interest Rates change daily.
2. Some restrictions may apply.
3. Availability of offered products & services vary from state to state.
4. Borrowers credit score and situation determines the actual payments.
5. Ampak Real Estate and Loans is not a lender.
Assumptions:
A) Rates are based for primary residence of the borrower and for purchase and refinance without any cash out.
B) Closing costs are not included, it is assumed that they are paid in advance by the borrower and the property in question is a single family home, credit score is more than 720 and the debt to income ratio is not over 30%.
C) The lock rate period of the loan is 30 days.
D) Loan to value (LTV) is less than 80%, PMI will apply if LTV is more than 80% (Certain exceptions may apply).
Upon receipt of all information from the borrower the interest rate may change if borrower's qualifications are different than the example program requirements. AMPAK may offer different loan packages according to the information provided by the borrower.
30 Year Fixed Interest Mortgage Rate:
The Annual Percentage Rate (APR) is calculated on the basis that the loan amount is $200,000.00 (less than 80% LTV) and closing costs are paid by borrower and not from loan proceeds. Insurance premiums, taxes, and escrow impound accounts are not included, such charges will effect actual credit costs. Higher loan to value loans, larger or smaller loan amounts will affect the interest rate and the APR as will purchase of points to lower interest rates. Some restrictions may apply from state to state.
15 Year Fixed Interest Mortgage Rate:
The Annual Percentage Rate (APR) is calculated on the basis that the loan amount is $200,000.00 (less than 80% LTV) and closing costs are paid by borrower and not from loan proceeds. Insurance premiums, taxes, and escrow impound accounts are not included, such charges will effect actual credit costs. Higher loan to value loans, larger or smaller loan amounts will affect the interest rate and the APR as will purchase of points to lower interest rates. Some restrictions may apply from state to state.
Please call 510-516-9773 and let our professional team give your situation the range of loans available to you and inform you on how each loan program can help you accomplishment your goals in home ownership. |
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