Home Loans: FHA vs Conventional Mortgages

FHA vs Conventional Mortgages

FHA home loans have been steadily growing in popularity over the past few years, and it’s not exactly hard to see why – with a down payment that equals out to only 3.5 percent, FHA loans can make buying or refinancing a home loan that much easier for many buyers.  This looks like an even more attractive offer when you consider that most conventional mortgages generally require a down payment upwards of 10-20% or higher.

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But wait, there’s more!

It’s important to note from the get-go that Federal Housing Administration loans aren’t actually exactly home loans in the traditional sense of the word – the FHA itself doesn’t really make or even guarantee home loans, it merely insures them.  This insurance is used to either minimize or outright remove the default risk that comes from buyers who put down less than 20% for a down payment.  FHA lenders are allowed to take and process loan applications as well as underwrite and close the loan themselves.

Many homebuyers tend to favor them over other loan types because they offer the easiest refinance options, allowing for more flexibility in the homebuyer’s credit rating, their financial income, equity, and (probably most important to many) the amount required for a down payment.

Downsides to FHAs?

With so many positives we’ve listed so far, there’s got to be a couple of negative points against them.  I mean, it can’t all be sunshine and rainbows, can it?

Well, there can be a couple of downsides.  Borrowers will have to pony up more money for insurance premiums.  This means paying an upfront mortgage insurance fee of at least 1.75 percent of the overall loan amount.  The good news here though, is that said fee can be rolled into the mortgage itself, so you won’t have to worry too much about coming up with funds for a separate fee.

Interested in learning more about FHA loans, or seeing if you qualify for one?  Contact us. Our loan officers are standing by…

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When is the Best Time for a Home Loan Refinance?

Are you considering a home loan refinance? A question we get asked on more than one occasion every week – especially in a market that’s about as stable as your average state fair wooden roller coaster is; When is the best time to refinance a home loan? Should you strike while the rates are lower than they were the previous week, or wait a little while longer and see if they fall even further?

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We certainly don’t blame consumers for asking such a question and giving any answer we give them the utmost scrutiny; after all, many experts have been claiming for a while now that the mortgage rates have finally bottomed out, only to see them fall further and further down into the hole.

Thankfully though, that doesn’t seem to be the case with this newest round of rate drops.  While the rates had seen a recent spike based on indications that the Federal Reserve would be scaling back its economic recovery boosts, many are now speculating the rates could cool down if the economy slows its course over the summer.

What does this mean to you?

If you’ve been hesitant to pull the trigger on a home refinance up until this point, you should know that now is as good a time as any to take another look at your mortgage rates, while keeping an eye on the market as a whole.

You’ll want to try and lock in your current rates now, but also make sure you remember to ask for a provision for the loan to float.  What this essentially means is that, not only are you protected in case the loan rates continue to climb, but you’re also afforded the opportunity to re-lock you loan at a lower rate should it continue to spiral downward.

You can also lock you rates in and pursue the mortgage application process the conventional way.  If the rates should fall any lower between now and the time the refi is approved, you can then attempt to renegotiate a lower rate with your lender.

Got some refi tips of your own to share?  We wanna hear them!

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4 Steps to Maximize Your Home Appraisal

Home appraisal is one of the most important aspects of refinancing your mortgage loan.  Setting an official estimate of your home’s overall worth can make all the difference in getting your long sought-after refi approved at the lowest rate possible.

So what’s the best way to making sure your home appraisal comes in as high as possible?  We’ve got the top 4 tips you need, right here:

  • Make sure you do your homework.  Before you get the appraisal process started, do some of your own research into the current trends in the real estate market; specifically, recent sales of homes like your own in and around your community.  Look into their sales prices, amenities, square footage, and put together a dossier on everything you find as proof that your home should be priced accordingly to your appraiser.
  • Sell them on your home.  No, I don’t mean do all the work of selling your home yourself.  I’m saying you’ll want to be present at the appraisal itself so you can take the opportunity to talk up some of the features of your home an outside observer might miss on their look-see.  Got oversized closets, a larger-than-average Jacuzzi bathtub, or a recently remodeled kitchen that offers a much nicer view of the backyard?  Let your appraiser know!
  • Fix ‘er up!  Have any home repairs that need attending to?   Now’s the time to get to them!  Dents in the walls, chipped or peeling paint, broken fixtures and burnt bulbs all need to be replaced and given a fresh coat of paint before the appraiser come a-knockin’.  So if you’ve been putting off home improvement projects cuz you just can’t think of a reason to improve where you hang your hat, THIS IS THAT REASON!  People talk about spending money to make money for a reason.
  • Call in the pros.  If you’re feeling a little overwhelmed at all the work that goes into home loan appraisal, consider calling in a professional that specializes in presenting homes for appraisal.  Many of them are well-versed on the ins-and-outs of appraisals, and can help  you get the best deals for as little extra cost as possible – especially when it comes to maintenance and home presentation, making your house look like the best on the block.
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Should You Refinance a 30-Year Mortgage to 15 Years?

Should you refinance a 30-year mortgage to 15 years?

Being a homeowner is just about one of the most significant accomplishments a person can achieve in their lifetime.  The allure of owning a home all to oneself can be so appealing that you can hardly blame people for wanting to do all they can to speed the process along.  For homeowners locked into a 30-year fixed home loan, this usually translates to trying to refi down to a 15-year loan so they can claim full ownership sooner rather than later.

There are other advantages to refinancing a 30-year mortgage to a 15-year loan that add to the draw: The shorter loan agreement typically comes with a lower interest rate, which means you’ll be saving on your monthly payments in the long term.  The flipside to that is that lower interest payments could result higher monthly payments compared to the 30-year loan, so there is a trade-off to consider.

With that said, here’s a quick rundown of points to think about if you are considering refinancing to a 15-year loan.

  • Can you afford the payments?  Say you’ve got a 30-year mortgage on a $200,000 loan with an interest rate of 3.8%.  At this rate, you’ll be paying about $138,000 in interest during the loan’s lifetime.  This same loan at a 15-year fixed rate would see the rate payments drop to around 3.1% (total interest payments: ~$50,000), but the monthly mortgage payment itself increases by about $400 a month.  So you’ll be saving more in the long haul, but can you afford the monthly increase now?
  • Make sure the rest of your finances are in order.  Before deciding to undertake something as significant as a home loan modification, you’ll want to take a good look at your other financial responsibilities and make sure adding another burden to the pile won’t cripple you.  If you’ve got large car or credit card debts that need to be paid down, we’d recommend focusing on those first before you take on any more major financial responsibilities.

Thinking about refinancing your current loan?  Our experts can help you out! Contact us today.

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