As with most major purchases, buying a home will present many options for financing. These options range from a very conservative 30 year Fixed Rate Mortgage to a Flexible Rate Mortgage that may be more suited to a very savvy investor and include a multitude of alternatives in between.
It is now more important than ever to get prequalified for your Georgia Home Loan. A recent change to the Georgia Association of REALTORS Purchase and Sale Agreement (the contract) now includes a time frame for financing approval. This time frame must be adhered to or you run the risk of loosing your earnest money.
During the prequalification your loan officer should also explain to you some of the financing options available. While this is not a complete list of every mortgage program in the market today, let´s examine some of the basics to help you understand some of the options available to you.
• Fixed Rate Mortgages are the most conservative of all financing options. The interest rate remains constant for the entire term of the loan. Fixed Rate Mortgages usually are for 15, 20 or 30 year terms.
• Adjustable Rate Mortgages are just what the name implies. The interest rate adjusts at predetermined intervals and is tied to one of several monetary indexes such as Treasury Notes or the LIBOR Index.
• Interest Only Mortgages allow the borrower to pay only the interest on the loan for a term of up to 10 years. After the period for interest only payments expires the loan converts to a Fixed Rate Mortgage.
• 100% Financing Options are typically utilized by First Time Buyers who have good credit but lack the sufficient funds for a down payment.
• Stated Income / Stated Asset Loans are utilized by borrowers that do not wish to provide income documentation or asset verification during the loan process and are reserved for higher credit score borrowers.
• Jumbo Loans are for first mortgages with a starting principal balance of over $417,000. I guess the name really does describe the program.
• Construction to Permanent Loans are a benefit to borrowers who may be building a new home from the ground up or perhaps for a borrower purchasing an older home in need of a major remodeling project.
• No Closing Cost Loans are when the Mortgage Broker pays the closing costs or a portion of the closing costs for the borrower. The broker is able to make this contribution by increasing the interest rate charged for the loan and then paying all or part of the closing costs from the yield spread paid to the broker from the investor.
There are several other things to be aware of with the loan process for your new home. Your loan officer will review with you a "Good Faith Estimate". This document provides you with an in depth explanation of the fees involved in closing your loan. Your loan officer will also need to lock your loan with the lender. Interest rates fluctuate daily on the various loan programs and locking the loan guarantees you will receive the interest rate the loan is locked at. One important detail to remember is that the rate lock for your loan will terminate on a specific date that is generally 30 days from the date the loan was locked. There are longer rate lock terms however they typically include a higher interest rate.
As you can see with the number of mortgage programs available, and not to mention the legal obstacles of a real estate contract, it is imperative that you align yourself with a qualified REALTOR and Loan Officer to help guide you through the maze of a real estate transaction.
Fortunately you can now have One Stop Shopping for your real estate and mortgage needs. As a REALTOR and Loan Officer, understanding your real estate ownership goal and helping you achieve it is where I excel. Let´s get together and discuss your needs!
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