Home Loan Products and Services – Folsom, CA
What Is A HARP Loan?
Government Program Can Save “Underwater” Homeowners Thousands on Their Mortgages: HARP, Home Affordable Refinance Program’s guidelines on refinancing Freddie Mac and Fannie Mae loans promise to improve the financial situation for thousands of American homeowners, chiefly by lowering their monthly mortgage payments.
Refinancing doesn’t have to be a time-consuming headache even if you owe more on your mortgage than your home is worth.
Qualifying for HARP:
- Borrowers who refinanced under the original HARP are ineligible.
- It applies only to loans purchased by Freddie Mac and Fannie Mae, the government-sponsored enterprises formed decades ago as a secondary mortgage market. Freddie Mac and Fannie Mae purchase most of the nation’s mortgages from the originating lenders.
- Restrictions on your loan-to-value ratio have been lifted.
- Borrowers need not stay with their current lender.
- Homeowners with jumbo loans, in foreclosure or who have missed mortgage payments in the last 12 months are not eligible.
What Is A Jumbo Loan?
Many borrowers with higher income levels choose to utilize mortgage financing with larger loan amounts than conventional loans provide. Jumbo loans are a financing tool that allows a buyer to purchase homes that are not restricted by a lender’s ability to sell it to Fannie Mae or Freddie Mac
- Jumbo Loans Defined: Fannie Mae and Freddie Mac, are government enterprises that purchase loans from mortgage originators, but they deem some loans too large to buy. These “jumbo” loans are known as “non-conforming” for this reason.
- Jumbo loan amounts vary according to the area in which you live. In San Francisco a jumbo loan is anything over $625,500, whereas, in less expensive areas, such as Sacramento, jumbo loans are anything over $474,950.
- Jumbo Loans Differ From Conventional Several Ways: Lenders consider jumbo loans to be riskier. If a buyer defaults, selling a luxury home can be more challenging. Also, compared to homes with smaller price tags, luxury home prices are more likely to be affected by shifts in the market.
- Larger Down Payment: Greater risks mean lenders typically require a greater down payment on jumbo loans and charge premium interest rates to cover the additional risk.
- Stricter Qualifying Guidelines: Qualifications for jumbo loans such as credit scores or debt-to-income ratios are more stringent.
What Is A USDA Loan?
USDA loans are an ideal financial solution for eligible low to moderate income home-buyers who are looking to minimize their cash out-of-pocket. Originating through private lenders, USDA loans are backed by the federal Department of Agriculture in the same way FHA loans are guaranteed by the Federal Housing Administration. While borrowers of FHA loans must pay a down payment and monthly mortgage insurance, USDA loans require neither.
- Keep Out-of-Pocket Expenses to a Minimum: Lenders offer low interest rates on USDA loans because the federal government insures against default, making monthly payments less expensive.
Are USDA loans a viable option for you?
Qualifying for USDA Loans
- Income: A borrower’s household income cannot exceed certain parameters set by the USDA. Calculating income can be complicated because some expenses, such as child care, are deductible.
- Credit score: While borrowers with less-than-perfect credit may qualify for USDA loans, a history of paying bills on time is required.
- Location: The home you wish to purchase must be located within zones specified by the Department of Agriculture. Rural areas and small cities and suburbs are included in these zones.
- Home type: USDA loans can be used to finance only single-family homes on property that includes no other structures – such as workshops or rental unit -that may be used to generate income.
Mortgage Insurance: While USDA loans don’t include mortgage insurance they do have a one-time “guarantee” fee of 2.75% of the loan amount, along with an annual fee of 0.5% of the loan balance.
What Is A VA Loan?
VA loans, guaranteed by the Veterans Administration, enable veterans, active members of the armed forces or their spouses to purchase homes for virtually no money down. VA loans offer one of the few opportunities in today’s volatile housing market to apply for 100 percent financing.
Who Qualifies for a VA Loan?
- Honorably-discharged veteran of World War II or later.
- Un-remarried spouse of a veteran who died while in service or from a service-related disability or spouse of a veteran who is a POW or MIA.
- Currently on active duty.
Creditworthy: While the Veterans Administration will not deny a VA loan application based on a low credit score, most direct lenders consider an applicant’s credit status when evaluating risk.
Additional features of VA loans: Rates on VA loans are often as much as ½ percent lower than a conventional loan. If you have at least 10% service-related disability, your funding fees will be waived. Should interest rates drop, you may be able to refinance your VA loan without having to re-qualify. This is known as “streamline” refinancing.
No Mortgage Insurance: Unlike FHA loans or conventional loans of more than 80 percent loan-to-value, mortgage insurance is not required on VA loans. That can save a borrower $100 or more every month. There is an up-front funding fee unless waived due to service-related disability.
What Is A Flip Loan?
First-Time Real Estate Investors and Seasoned Pros use Flip loans, referred to as “fix and flip”. They differ from other types of loans.
Real estate investors typically use flip loans to purchase homes, renovate them, and sell them within a short time. These are also called “Hard Money Loans” because they often originate with private lenders who do not follow conventional lending guidelines.
Borrowers are becoming more familiar with this type of financing due to television shows that chronicle investors and renovators “flipping” homes for profit. Flip loans are a long-standing aspect of the mortgage market that target borrowers with specialized needs.
Flip and Hard Money Loans Explained – Different than a conventional mortgage.
- Fannie Mae and Freddie Mac, the government-sponsored entities that buy loans on the secondary mortgage market, do not deal in Flip Loans. The risk to lenders is greater and interest rates and fees on f are generally higher than conventional loans.
- Terms on flip loans are short. Borrowers may have from three months to a year to repay a flip loan, depending on the lender. In some cases, lenders require the loan to be paid off entirely at the end of the term instead of in monthly payments.
- Closing costs for flip loans may also be quite a bit higher than conventional loans, but borrowers generally have cash in hand much sooner. That’s important for investors who wish to move quickly to purchase homes in foreclosure or through short sales.
- Because homes purchased for resale are often in some state of disrepair or require updating, costs for property renovations are commonly included in flip loans.
- The investment potential of a property plays a prominent role in the hard money process. In assessing a borrower’s application, lenders review the value of a home, purchase price, and repairs that an investor plans on doing. This emphasis on the real estate itself means a less-than-ideal credit score is not necessarily nor an obstacle to being approved for flip loans.
What Is An Investor Loan?
Why Invest in Real Estate? New investors are turning to Real Estate to offset under-performing returns in their traditional mutual-fund portfolios, while seasoned investors are doubling down on big profits. Recently, many factors have made Real Estate more attractive, including lower home prices, interest rates, tax benefits, and positive cash flow. As a result, Real Estate has regained its strength as an opportune area to realize positive returns.
Investor Loans That Are Right for You: Lenders consider many factors during the approval process for investor loans:
- Strength of the Investor: This is the single most important factor lenders consider when evaluating applications for investor loans. Lenders look at Credit Scores, liquid reserves in the bank, income outside of the investment, stability, and cash for down-payment, closing costs and reserves.
- Property being Financed: Not all properties are equal when it comes to financing. While condos may be cheaper, they are more difficult to finance. Duplexes have great income potential, but often require larger down payments. Anything over 4-units is considered commercial and requires stricter guidelines from lenders.
- Appraisals: Lenders will typically require an additional 1007 Appraisal Report, a Rental Survey, in order to know what can be expected in revenue from the property.
- Down-Payment: Investor loans require a minimum of 20% down-payment for most properties. There are rate improvements for 25% down-payment or more. Properties with over 2 units require larger down-payments.
- Improvement – Flipping Property: Investors requiring cash to purchase homes from the county courthouse steps will need to use Private Money loans. Once the work has been completed on the property, the private money loan can be replaced with a traditional conventional investor loan.
What Is A Refinance Loan:
With interest rates and the overall cost of refinance loans dropping in recent years, many homeowners can reduce their monthly mortgage payments by hundreds of dollars a month, even if they’ve lived in their home just a few years. Refinance loans are also available through government programs designed to make mortgages more affordable for homeowners.
Refinance loans may also help you tap into the equity you’ve built in your home to raise cash for home improvements, to pay off higher interest loans, consolidate a first and second mortgage, or finally invest in that business you’ve been dreaming about.
Some Things to Consider About Your Refinance:
- Replace Your Existing Loan: Refinance loans essentially replace current mortgages. Homeowners who are seeking refinance loans to save money, reduce the risk of a variable-rate loan or raise capital should be prepared to go through the same process they experienced in obtaining their previous mortgage.
- Paying Off Your Mortgage Faster: Refinance loans aren’t necessarily about saving on the monthly mortgage payment. By paying a higher amount each month on a shorter-term mortgage, you may realize substantial long-term savings.
- An Example – Moving to a 15-Year Mortgage: The monthly payment on a 30-year, $250,000 loan with 4.3 percent interest is roughly $1,550. A 15-year loan for the same amount and a 3.8 percent interest rate will cost you an additional $550 a month, or about $2,100. You’ll pay more than $190,000 in interest on the 30-year loan, but less than $78,000 in interest on the 15-year loan, a savings of about $120,000.
Other factors to keep in mind when considering refinance loans:
- Is Your Property Upside Down? If you owe more on your mortgage than your home is worth, it still may be possible.
- What If I Have A Second Mortgage or HELOC? The balance on a second mortgage or line of credit must be factored in when calculating the equity in your home.
- When Is It A Large Enough Drop To Refinance? One school of thought holds that a new rate should be at least two percentage points lower than the existing mortgage, but interest rates should not solely determine the feasibility of refinancing. If the benefit outweighs the cost, then it may make sense to refinance.
- How long you will be living in the home? If you anticipate moving within a few years, check the numbers. It may or may not make sense to refi.
- Closing Costs and Points: Closing costs associated with refinance loans may be lower than with a purchase mortgages. Paying points to lower the interest rate is recommended only if you plan on living in the house long enough to at least break even.
- Credit Scores: A strong credit score is always an asset when applying for refinance loans so that you can get a better rate.
To start the loan process, it is pretty simple. Fill out an application on-line at (Apply for a Home Loan) or call us at (916) 985-3200 for an application over the phone.