 |
|
| Office: | 828-771-2328 |
| Cell: | 828-242-9589 |
| Contact Kathleen | |
| Quick Search | |
| Enter identifying MLS
numbers
below 
separated by commas and click-on Search: |
|
Asheville Real Estate Mortgage Center
NC Real Estate General Information ~Types of Mortgages.
Fixed Rate Conventional Mortgage:
A conventional loan is a loan made to a buyer without a third party participant, such as VA or FHA. Fixed rate conventional loans are typically paid off in equal monthly payments spread over 15, 25, or 30 years. The interest rate stays the same for the life of the loan, therefore the monthly principal and interest payment remains constant.
Terms of a conventional loan vary among lenders, but must be obtained with as little as 5% down payment. When the down payment is less than 20% it is necessary to obtain private mortgage insurance (PMI) to protect the lender from a buyer’s default.
Advantage: Quick processing and stable payments.
15-Year Mortgage:
This loan is a straight 15-year amortized mortgage at current or below market rates, and the buyer owns the home free and clear in 15 years, instead of 30 years. Lower rates combine with a shorter term to produce payments somewhat higher than 30-year loans.
Advantage: Rapid equity growth and mortgage payoff, dramatic interest savings.
Adjustable Rate Mortgage (ARM; also “variable rate”):
As its name implies, an adjustable rate mortgage (ARM) is one in which the rate changes (adjusts) on a specified schedule after an initial “fixed” period.An ARM is considered riskier than a fixed rate mortgage because your payment may change significantly. In exchange for taking this risk, you are rewarded with an initial rate that is significantly below market rates for 30-Year Fixed Rate Mortgages. The more frequent the rate adjustments through the life of the loan, the lower the initial rate. Even after the loan adjusts, new rates will typically be below rates being offered to new borrowers for the 30-Year Fixed Rate program. Obviously, it’s best to have an ARM when interest rates are predicted to fall (not rise) because in periods of rising interest rates, it is possible that you will ultimately pay much more for an ARM than for a 30-Year Fixed Rate Mortgage.
Although somewhat riskier than a fixed rate mortgage, an ARM may benefit you if you have certain needs or find yourself in certain circumstances. In other circumstances, you may be better off with a fixed rate or other type of mortgage. Examine your financial and life situation with the help of your loan officer or financial advisor.
An ARM can give a short-term “boost” to your finances
Having a low initial fixed rate can free up some money early in your loan term. For the purpose of illustration, we’ll assume a one-year ARM. This is a 30-year loan in which the rate (and therefore your monthly payment) changes every 12 months on the anniversary of your loan.
We’ll assume a 30-year fixed rate with zero points and a rate of 7.625 percent compared to a one-year ARM with zero points and an initial rate of 5.625 percent. On a $240,000 loan amount, the 30-year fixed rate would yield a monthly payment of $1,698.70. The one-year ARM would yield a monthly payment of $1,381.58. That's a difference of $317 per month, or $3,800 over the next year.
What could you do with an extra $3,800 this year? Some borrowers find the extra money useful for paying off other credit or moving expenses, for landscaping the yard, and so on. Of course, you will want to stay away from incurring additional debt or improving your lifestyle to the point that you can’t afford the higher payment once your rate adjusts upward.
An ARM can allow you to qualify for "more house"
Obtaining an ARM can allow you to qualify for a higher loan amount and therefore a more valuable house. Many people with exceptionally large mortgages get one-year ARMs and refinance them every year. The low rate allows them to buy a costlier home yet pay the lowest mortgage payment possible. The down side is that there are costs associated with refinancing. So before you use this option, look at all the costs and do the math yourself or ask for help from your loan officer.
An ARM could be beneficial depending on your future plans
What are the factors that could cause you to move or upgrade in the next few years? Why obtain a higher-rate 30-year fixed rate mortgage if a job transfer or twins is even close to likely? An ARM with a lower initial rate could be a better (and cheaper) way to go.
If you know that you are only planning on living in a property for a short period of time (1-10 years) then the benefits of getting an adjustable rate mortgage are enhanced. You can enjoy the interest and payment benefits with less of the risk. Ask your lender to help you crunch the numbers.
If you do plan to refinance or sell soon (and therefore pay off the loan), read the loan documents carefully. Some contracts stipulate a penalty for paying off the loan early.
What affects the amount of the adjustment?
The amount of the rate change (referred to as an Adjustment) is determined by a mathematical formula based on a particular index, the most common being the 1-Year U.S. Treasury Bill. Your lender does not control the index so it is safe to assume that your adjustment will be fairly determined (although you should always verify your new rate by comparing with published numbers).
All adjustable rate mortgages have a lifetime rate cap (ceiling), which limits the amount the interest rate of the loan can increase over the life of your loan. Most adjustable rate mortgages also have a periodic rate cap, which limits the amount of rate increase for each adjustment.
What kinds of ARMs are available?
1-Year Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment)
changes every 12 months on the anniversary of your loan. This loan is considered
quite risky because your payment may change significantly from year to year.
3-Year Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment)
changes every 3 years. This loan, while risky, is safer than the 1-Year
Adjustable Rate Mortgage only because it does not adjust as frequently.
5-Year Adjustable Rate Mortgage
This is a 30-year loan in which the rate (and therefore your monthly payment)
changes every 5 years. This loan is a nice compromise between shorter term
Adjustable Rate Mortgages and Fixed Rate programs.
3/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 3 years and then
turns into a 1 Year Adjustable Rate Mortgage for the remaining 27 years of the
loan.
5/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 5 years and then
turns into a 1 Year Adjustable Rate Mortgage for the remaining 25 years of the
loan.
7/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 7 years and then
turns into a 1 Year Adjustable Rate Mortgage for the remaining 23 years of the
loan.
10/1 Adjustable Rate Mortgage
This 30-year loan offers a fixed interest rate for the first 10 years and then
turns into a 1-Year Adjustable Rate Mortgage for the remaining 20 years of the
loan.
The interest rate may go up or down over the years and is tied to a financial market index (such as one-year Treasury bills). Monthly payments may also be adjusted on a periodic schedule. Many ARMs set a maximum adjustment (or “cap”) on possible increases to interest rates, monthly payments, and/or maximum cap on rates for the life of the loan.
Advantage: The lower interest rate and monthly payments allows the buyer to pay less in the early years for a larger loan. Caps offer peace of mind rate ceilings.
Some types of ARMs (for example, option ARM loans) offer payment caps rather than interest rate caps, which limit the amount the monthly payment can increase. If a loan has payment cap but has no periodic interest rate cap, then the loan may become negatively amortized: if the interest rates rise to the point that the monthly mortgage payment does not cover the interest due, any unpaid interest will get added to the loan balance, so the loan balance increases. However, you always have the option to pay the minimum monthly payment, or the fully amortized amount due.
Example:
Your loan has a payment cap of 7.5%. If your payment is $1,000 per month and interest rates rise, your new payment would normally be $1,200/mo (for example). But your capped payment is only $1,075. The other $125 get added to your loan balance, to be paid off over time, unless of course you decide to pay that additional amount now.
The advantage of negatively amortizing loans is that you can control cash flow (relatively stable payment), take advantage of low interest rates relative to the market at any given time, and pay back the money borrowed today at a depreciated value years from now (because of natural inflation). This makes such loans a great tool for homeowners as long as you understand the mechanics of what's going on.
With most ARMs, the interest rate can adjust every month, every three or six months, once a year, every three years, or every five years. The interest rate on negatively amortized loans can adjust monthly. A loan with an adjustment period of 6 months is called a 6-month ARM, with an adjustment period of 1 year is called a 1-year ARM, and so on.
Most ARMs offer an initial lower interest rate than the fully indexed rate (index plus margin) during the initial period of the loan, which could be one month or a year or more. It is also known as teaser rate.
All ARMs are available with 30-year terms and some with 15- or 40-year terms. Adjustable rate mortgages generally have a lower initial interest rate than fixed rate loans.
Option ARM Loans
One of the most creative products that doesn't require a set payment each month is the option ARM. After the first payment, you get four payment options to choose from each month: your lender sends you a monthly statement offering a minimum payment (1), interest-only payment (2), 30-year amortized payment (3) or 15-year amortized payment (4).
FHA Loan:
Strictly speaking, FHA does not make loans; rather it insures loans, which increases lenders’ willingness to make low down payment loans. With an FHA-insured loan, a homebuyer can make a small down payment, a feature particularly attractive to first-time buyers. The down payment often averages in the range of 3-5% of the loan amount. Second mortgages are now permitted.
Points (pre-paid interest) can be charged by the lender, but since the FHA rate is now tied to the points, the purchaser may negotiate the interest rate and points with the seller. FHA charges an advance mortgage insurance premium (MIP) fee. Ask an agent how much the fee would be in your situation, and if you can borrow the fee and add it to the loan amount rather measurably increase your closing costs.
FHA-insured mortgages offer a maximum loan amount that varies area to area. We can help you determine the prevailing maximum loan amount in this area.
Advantage: Low down payments; low interest rates; long terms; many are fully assumable loans; no prepayment penalty; second mortgage permitted under certain circumstances.
VA Loan:
Qualified veterans can take out loans up to a specific limit with no down payment, or up to a higher limit with some down payment. These limits occasionally change; check for current rules. VA-guaranteed loans can be combined with second mortgages and are fully assumable by any future buyer. Payments are fixed for the full term.
VA/FHA qualification guidelines are more flexible than those for conventional loans. Actual income qualifications are dependent on the type of loan requested.
Advantage: Usually no down payment and an interest rate typically below conventional loans; points can be paid only by the seller, although the buyer is charged a 1% loan origination (not tax deductible); no pre-payment penalty; assumption may make your home very attractive to buyers when you decide to sell.
Jumbo Loans:
Loans above the maximum loan amount established by Fannie Mae and Freddie Mac are known as 'jumbo' loans. Because jumbo loans are bought and sold on a much smaller scale, they often have a little higher interest rate than conforming, but the spread between the two varies with the economy.
If you are looking for a jumbo loan and need more information or advice, we invite you to take advantage of our database of the most competitive lenders available. Just complete a short loan request form and the best lenders in your local area will contact you with their rates and fees.
B/C Loans
Loans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are called 'B', 'C' and 'D' paper loans vs. 'A' paper conforming loans. B/C loans are offered to borrowers that may have recently filed for bankruptcy, foreclosure, or have had late payments on their credit reports. Their purpose is to offer temporary financing to these applicants until they can qualify for conforming "A" financing. The interest rates and programs vary, based upon many factors of the borrower's financial situation and credit history.
Balloon loans
Balloon loans are short-term fixed rate loans that have fixed monthly payments based usually upon a 30-year fully amortizing schedule and a lump sum payment at the end of its term. Usually they have terms of 3, 5, and 7 years.
The advantage of this type of loan is that the interest rate on balloon loans is generally lower than 30- and 15- year mortgages resulting in lower monthly payments. The disadvantage is that at the end of the term you will have to come up with a lump sum to pay off your lender, either through a refinance or from your own savings.
Balloon loans with refinancing option allow borrowers to convert the mortgage at the end of the balloon period to a fixed rate loan -- based upon the outstanding principal balance -- if certain conditions are met. If you refinance the loan at maturity you need not be requalified, nor the property reapproved. The interest rate on the new loan is a current rate at the time of conversion. There might be a minimal processing fee to obtain the new loan. The most popular terms are 5/25 Balloon, and 7/23 Balloon.
Combined (Hybrid) Loans
Hybrid loans, a combination of fixed and ARM loans, come in different varieties:
Fixed-period ARMs
With fixed-period ARMs homeowners can enjoy from three to ten years of fixed payments before the initial interest rate change. At the end of the fixed period, the interest rate will adjust annually. Fixed-period ARMs -- 30/3/1, 30/5/1, 30/7/1 and 30/10/1 -- are generally tied to the one-year Treasury securities index. ARMs with an initial fixed period beside of lifetime and adjustment caps usually have also first adjustment cap. It limits the interest rate you will pay the first time your rate is adjusted. First adjustment caps vary with type of loan program.
The advantage of these loans is that the interest rate is lower than for a 30-year fixed (the lender is not locked in for as long so their risk is lower and they can charge less) but you still get the advantage of a fixed rate for a period of time.
Two-Step Mortgage
Two-Step mortgages have a fixed rate for a certain time, most often 5 or 7 years, and then interest rate changes to a current market rate. After that adjustment the mortgage maintains new fixed rate for the remaining 23 or 25 years.
Convertible ARMs
Some ARMs come with option to convert them to a fixed-rate mortgage at designated times (usually during the first five years on the adjustment date), if you see interest rates starting to rise. The new rate is established at the current market rate for fixed-rate mortgages.
The conversion is typically done for a nominal fee and requires almost no paperwork. The disadvantage is that the conversion interest rate is typically a little higher than the market rate at that time.
The other kind of convertible mortgage is a fixed rate loan with rate reduction option. If rates had dropped since the time of closing it allows you, under some prescribed conditions, for a small conversion fee to adjust your mortgage to going market rate. Generally the interest rate or discount points may be a little higher for a convertible loan.
Graduated Payment Mortgages (GPMs)
Graduated payment mortgages have payments that start low and gradually increase at predetermined times. A lower initial payments allow you to qualify for a larger loan amount. The monthly payments will eventually be higher in order to catch up from the lower payments. In fact, your loan will be negatively amortizing during the early years of the loan, then pay off the principal at an accelerated pace through the later years.
Lenders offer different GPM payment plans, which vary in the rate of payment increases and the number of years over which the payments will increase. The greater the rate of increase or the longer the period of increase, the lower the mortgage payments in the early years.
A temporary buydown is the type of loan with an initially discounted interest rate which gradually increases to an agreed-upon fixed rate usually within one to three years. An initially discounted rate allows you to qualify for more house with the same income and gives you the advantage of lower initial monthly payments for the first years of the loan when extra money may be needed for furnishings or home improvements. To reduce your monthly payments during the first few years of a mortgage you make an initial lump sum payment to the lender. If you do not have the cash to pay for the buydown, the lender can pay this fee if you agree on a little higher interest rate.
A very popular buydown is the 2-1 buydown.
Example
If the interest rate on the note is 8% with a 2-1 buydown mortgage your initial discounted rate is 6% and you would have 6% interest rate for the first year, 7% for the second year, and 8% afterwards. You will need to prepay the difference in payments between the 6% and 8% rates the first year, and between the 7% and 8% rates the second year.
3-2-1 and 1-0 buydowns are also available, though less common. Compressed Buydown, works the same way, but with the interest rate changing every six months instead of on a yearly basis.
The lower rate may apply for the full duration of the loan or for just the first few years. A buydown may be used to qualify a borrower who would otherwise not qualify . This is because a buydown results in lower payments which are easier to qualify for.
With a variety of different loan programs available, it is important to choose the type of loan that will best suit your needs.
The right type of mortgage chiefly depends on how long you plan on staying in the house and the amount of monthly payment you can comfortably afford.
If you don't plan to stay in your house for at least 5 to 7 years, it will be reasonable to consider an Adjustable Rate Mortgage, Balloon Mortgage or Two-Step Mortgage. ARMs traditionally offer lower interest rates during the early years of the loan than fixed-rate loans. A Two-Step Mortgage will give you a lower interest rate than a 30-year mortgage for the first five or seven years. A Balloon Mortgage offers lower interest rates for shorter term financing, usually five or seven years. Because of a lower interest rate it is easy to qualify for these type of mortgages. However don't accept the ARM unless you can afford the maximum possible monthly payment.
Generally, you can start to consider 15 or 30 year fixed rate mortgages if you plan to stay in your home for more than seven years.
Interest only mortgages are just what they sound like. Here, you will pay for your loan in terms of just interest, with very little principle. The benefit is that you lower your mortgage payment, making it more affordable for you to make your monthly payments. For many people, this is an ideal type of loan that offers several benefits. It is up to you to determine if this is the right type of loan for your situation though. To do that, use a mortgage calculator to help you. Fully understand how this loan works before jumping into it!
In a traditional loan, you will make a payment each month that is split. Part of the payment is paying for the principle of the loan or the amount of money that you actually borrowed. The rest is used to pay the interest on the loan. In most loans, you will pay much more interest at the beginning of the loan than you will interest and that is what makes lending so lucrative to lenders. In an interest only loan, you pay a very small principle payment or even just interest only. The principle is held off and is to be paid in other ways.
In most cases, people will use this type of loan if they do not have a steady income or they do not want to remain in the home for a very long time. Here, the cost reduction of the monthly payment is well worth it. But, there is more to think about here. For example, you will need to pay the principle that you borrowed at some point if you plan to every own the home. Usually this is done by the homeowner in payments when it is available to them. Others will require payments at certain times during the lending process or even a balloon payment at the end of the loan period.
For those that work in sales or in seasonal jobs, this type of loan can be helpful. For example, perhaps you sell homes. When you sell a home you can put more towards the cost of the mortgage and when you do not have a sale, then you can make the interest only payment. This type of set up works well for many people because it allows them to make larger payments when they can and smaller payments when they have to. Of course, you do need to meet strict qualifications for this type of loan.
For those that are not looking to remain in the home for a long period of time, this type of loan can help them to save money by not making any principle payments at all. For example, if you plan to live in your home for just a few years, you may want to consider this type of loan which can lower your monthly payments considerably so that you do not put more into the home's cost than you need to.
When considering an interest only mortgage, it is important to see what the real benefits of this type of loan will be for you. It is also important to carefully consider just how well this loan will fit into your lifestyle. For many people, it is ideal and it may be for you, too. Here is an example of how much you can save per month on an interest only type of loan.
Total Mortgage Amount: $250,000
Annual Interest Rate: 6.5 percent
Term of the Loan: 30 Years
With a standard loan, your monthly payment would be about $1580. If you secured an interest only payment, your monthly payment would be about $1354. This is a savings of $266 a month on the loan or nearly $3200 per year in payments. That is a considerable difference to many people.
You will want to consider how this will work in your specific situation. The interest rate that you are charged on your interest only mortgage is based on your specific qualifications. Often times, a good credit score is necessary to obtain this type of loan because it helps to show that you will make payments. More so, because the loan will be lower in terms of monthly payment, you may qualify for a higher loan amount if you have a good credit score. You also should figure out the right situation for you in terms too. A longer term will lower the monthly payment but will cost you more. A shorter term costs more per month but saves in you in the long run on the total cost of the home.
What's important to remember is that just because you are saving that amount per year does not mean that you will never have to repay it. In fact, you will. If you plan to keep your home and to own your home, you will still need to make principle payments every year or at the end of the lending term. For many others, this type of loan is a good option if they are improving their credit score. If you know that in a year or so you will have a better credit situation, you may be planning to refinance your loan. Therefore, paying this lower amount per year can help you to accomplish that. You can later refinance the loan to get a better interest rate and a fixed rate loan in traditional methods.
Learn how well an interest only loan can work for you. Take the time to go through the process of securing a loan that fits your overall lifestyle. Use a mortgage calculator to help you to see just how well this type of loan will work for your situation. You may be impressed with just how affordable it can be for your situation. It can often open doors to those that otherwise may not feel they can afford a home loan. Interest only loan calculators are readily available to help you to see the benefits.
For many people an interest only loan can provide much peace of mind and numerous advantages. The biggest advantage of this type of loan is that it gives you control of your payment as well as your cash flow. In the event that you run into unexpected financial difficulty or extra expenses you can lower your monthly payment by paying only the interest.
Advantages
Disadvantages
With an interest only loan, only the interest is paid in the first portion of the loan. Based on your lender, the interest only term of the loan can be flexible. The most common period is the first five or ten years of the loan.
If you decide an interest only loan is the right option for you, MortgageLenders.org can help you locate a variety of lenders to compare interest only loan products.
Believe it or not it is entirely possible to purchase a home without making a down payment. This can be done through a zero down loan and they are quite popular with first time home buyers or any buyer who may have difficulty coming up with a down payment.
Traditionally, home purchases have required a 20% down payment. Naturally, this kind of down payment can be somewhat difficult for many buyers to accumulate, particularly with the rising costs of homes across the nation. If you have your eye on a $100k home this type of down payment requirement is an easy $20k. Over the years many different types of loans have been developed to help first time home buyers and other buyers realize the dream of home ownership without breaking the bank to do it. These options; however, still typically include a 3-5% down payment. For many homebuyers this can still be quite steep.
What you Should Know
While the obvious advantage to a zero down loan is the ability of a buyer to
purchase a home without making a down payment at all, there are several factors
regarding this type of loan you should understand up front.
First, any loan that involves financing more than 80% of the home’s purchase price will typically require private mortgage insurance, also known as PMI. This insurance is paid by the buyer, usually as an addition to the monthly mortgage payment. It protects the lender in the event the buyer defaults on the loan. Keep in mind that with a zero down loan, even though you are avoiding the down payment, you will be raising your monthly mortgage cost.
You should also know that a zero down loan does not mean that you can close on your loan with no money at all. You will still typically be responsible for closing costs such as:
Usually, you can plan for your closing costs to run about 3% or more of the purchase price of your home. So while you won’t need a down payment for that $100k home you will need at least $3,000 for closing costs.
If you’re looking for a zero down mortgage, MortgageLenders.com can quickly help you find a selection of lenders to meet your loan needs.
A reverse mortgage can be the answer to a prayer for many older homeowners, especially those on a fixed income.
What is a Reverse Mortgage?
A reverse mortgage allows the homeowner to turn part of the equity in their home
into cash. Depending on the type of reverse mortgage you choose, the funds can
be paid in a single lump sum, but most plans allow the funds to be paid to the
homeowner in installments each month.
How is a Reverse Mortgage Repaid?
Most reverse mortgage lenders do not require the loan to be repaid until the
borrower is no longer living in the home as their principal residence. This
means the loan will come up for repayment when the homeowner sells their home,
moves to another residence or is no longer living. While plans do vary, many
reverse mortgage lenders will provide the homeowner’s beneficiaries up to six
months to repay the loan in the event of the homeowner’s death.
Who Qualifies for a Reverse Mortgage?
You should know the amount of money you can borrow will typically depend on several factors including:
When looking for a reverse mortgage lender, be sure to consider the payment options available to you, interest rate and the amount of money you can borrow. MortgageLenders.org can help you find a variety of reverse mortgage lenders to choose from.
North Carolina Experienced Mortgage Lenders
Dianna Bradddock, Mortgage Consultant
Tucker & Trainum
1 Tunnel Road
Asheville, NC 28805
Office: (828) 771-2391
Fax: (828) 254-8351
Website:
tuckerandtrainum.com
Daniel Flint, Mortgage Consultant
Community First Mortgage Co.
Office: (828) 452-9252
Fax: (828) 454-0495
Website:
communityfirstmortgagenc.com e-mail: danflint@communityfirstmortgagenc.com
Rick Broom, Mortgage Consultant
Family First Mortgage
110-B Chadwick Square Court
Hendersonville, NC 28739
Office: (828) 636-1770
Cell : (828) 388-2033
Fax: (828)696-3043
Website:
familyfirstmortgage.comRemember: Buying and selling a luxury home or finding that special piece of Asheville Real Estate with Kathleen Blanchette, a fully licensed Keller-Williams Asheville Real Estate Broker and Realtor, is a comprehensive and thoroughly professional experience in buying and selling Asheville Real Estate throughout the Blueridge and Smokey Mountains, where efficiency, personal regard and concierge services are guaranteed every step of the way. Keeping the Tradition of Integrity..., and a Reputation for Results!
Asheville Real Estate
|
Asheville NC Real Estate MLS Property Search in All 9 Counties
