Buying, Refinancing, Construction Loans
Conventional Loans and the Process
WHERE SHOULD I START?
Start with Advisors Mortgage. Here is their advice on finding the right loan.
It is hard to know where to begin! There are so many options that it can be very confusing to find the right type of loan to suit your individual needs. You must first ask yourself many questions:
- How much can I afford to pay each month?
- Do I plan on keeping this property for only a few years or for a long period of time?
- Is a small payment a higher priority than paying the loan down quickly?
- Am I able to make a down payment?
- Over how many years do I want to pay a mortgage?
- Am I trying to find a mortgage or refinance an existing mortgage?
- Is my income stable? Will it be rising in the future?
The answer to these questions will help you know which loan will be best for you. Of course, we will guide you as to which program best suits your needs. However, there are a wide variety of loan options, so it will be useful to know some basic information.
- The larger the down payment, the better your options are for payment size, interest rate, and length of time to pay back the loan.
- A fixed interest rate will tend to be higher than an adjustable rate.
- The longer the term of payback, the smaller the payment will be.
- The smaller your payment, the larger the amount will be paid in interest.
- The more that you pay to interest, the slower that you are building equity.
It is also useful to understand the essential differences in types of loans. There are really only three basic types of loans:
- Fixed Interest Mortgages (FRM)
- Adjustable Rate Mortgages (ARM)
- A Hybrid (some combination of the two)
Loans are also classified as either government loans or conventional loans. Government loans such as FHA and VA have differing qualifications and parameters.
WHAT IS A CONVENTIONAL LOAN?
Conventional loans are broken down into either conforming or non-conforming loans. To qualify as a conforming loan (or an A paper loan), it must fall under the guidelines established by Fannie Mae and Freddie Mac, corporations that have established industry standards and guidelines that govern credit requirements, down payment amounts, and maximum loan amounts. Borrowers that do not meet those requirements due to flawed credit can often still obtain what is known as a non-conforming loan (B, C, or D paper loans).
Your loan options can be limited by poor credit. A credit score is a system of points earned based on your credit history. This three-digit number (ranging from 300 to 900) is influenced by such factors, among others, as:
- Late payments
- Debt-to-credit ratio
- Total debt amount
- Age of accounts (the older the better)
There are three major credit bureaus (Experian, Equifax and TransUnion) that produce comparable credit scores using some version of FICO, the industry standard developed originally by Fair Isaac and Company. Because this credit score is used by most lenders to determine your qualifications for a loan, you may want to see what you can do to increase your credit score before you apply for a mortgage.
The perfect refi made to order.
So you're not looking to buy your first home. After all, you've lived in your home for years. But you need a better rate or a lower payment or you need some cash out to do a new kitchen. You might also want to consolidate your high interest credit cards into one payment. Here's where the right refi comes in. There are 15 year terms, 20, 30, etc. It really all depends on what you are looking for. Are you looking to shorten your term and pay off your mortgage sooner? Are you looking for cash to do a renovation? Maybe you are just in debt for a variety of reasons. Those situations can have solutions.
Talk to your mortgage specialist who will know the various programs so you can decide what best suits your needs. And click the link for the Advisors Mortgage website where you'll find information and the ability to apply online. (English and Spanish applications.)
Construction Loans
Two Main Types of Construction Loans
Construction-to-permanent: You borrow to pay for construction. When you move in, the lender converts the loan balance into a permanent mortgage. It’s two loans in one.
Stand-alone construction: Your first loan pays for construction. When you move in, you get a mortgage to pay off the construction debt. It’s two separate loans.
Construction to Permanent
You haveone closing with a construction-to-permanent loan which reduces the fees you pay.
2 types of home construction loans
There are two main types of home construction loans:
- Construction-to-permanent: You borrow to pay for construction. When you move in, the lender converts the loan balance into a permanent mortgage. It’s two loans in one.
- Stand-alone construction: Your first loan pays for construction. When you move in, you get a mortgage to pay off the construction debt. It’s two separate loans.
Construction-to-permanent loans
You pay interest only on the outstanding balance. The interest rate is variable during construction, moving up or down with the prime rate. If the Federal Reserve raises or decreases short-term interest rates while the house is being built, your interest rate will change.
The lender converts the construction loan into a permanent mortgage after the contractor finishes building the home. The permanent mortgage is like any other mortgage. You can choose a fixed-rate or an adjustable-rate loan and specify the loan’s term, typically 15 or 30 years. When you’re ready, shop and compare mortgage rates.
Many lenders let you lock a maximum mortgage rate when construction begins. Lenders generally require a down payment of at least 20 percent of the expected amount of the permanent mortgage. Some lenders make exceptions.
Stand Alone Construction
Stand-alone construction loan can work out well if it allows you to make a smaller down payment. That can be a major advantage if you already own a home and don’t have much cash for a down payment but you will have more cash after you sell your home. You can live in your current home while your next home is under construction.
This type of loan has drawbacks, though:
You pay for two closings and two sets of fees — first, on the construction loan; second, on the permanent mortgage.
- You can’t lock a maximum mortgage rate. If rates rise during construction, you might have to pay a higher-than-expected interest rate on the permanent loan.
And if your financial circumstances change for the worse during construction, you may find it difficult or impossible to qualify for a mortgage.
Qualifying for a Construction Loan is Harder
When you apply for a loan to build a home, the lender doesn’t have a complete home as collateral, so qualifying for a loan can be more difficult. The lender will want details about the home’s size, the materials used and the contractors and subcontractors who do the work. The general contractor can pull all this information together.
On top of that, the lender needs to know that you can make your monthly loan payments during construction. If the lender thinks you can’t make your current rent or mortgage payments while your house is being built, you won’t qualify.
Adequate savings for unexpected costs a must
The lender will make sure you have savings to pay for unexpected costs. “There are always cost overruns when you are building a home that you may not know about until you are into it. We don’t want them to use every last dime they have before they start,” said Dennice Henshaw, former eastside division manager for Washington Federal. Cost overruns are incurred when borrowers change their minds about what they want as construction proceeds.
Choose your builder carefully
An important aspect of building your home is choosing the right builder. Find one that has built the kind of house you want in terms of price, style and size. Look into the builder’s credentials with the local homebuilders association and ask for references from previous clients. Check with the Better Business Bureau to see whether there are any complaints against the builder.
Typically, your lender will look into the builder’s credit standing, financial situation and licenses, as well as the track record for building similar homes.
Expect ongoing inspections during construction
Lenders will conduct routine inspections as the home is built. During this period, the lender pays the builder in stages, called “draws,” and usually sends an appraiser or
The Keys to Your Future
It's experience that counts. 20 years to be exact. You can count on Advisors Mortgage Group.
Whether you are looking for a new home or moving from one home to another, you have a professional company with an A+ Better Business rating here to help you. The keys to your future are considered your new home, but I truly feel the keys to your home are those inside--- those you truly love that are the true keys to your abode. Let us help you find a home or refinance an existing one with a great mortgage that will reward you and those you love with many years of enjoyment.
ABOUT US - WHO IS ADVISORS MORTGAGE?
With big dreams and even more determination, Advisors Mortgage Group, LLC was founded in October 1999 by a single loan officer in a 400 square foot office in Shrewsbury, New Jersey. In the years since its formation, AMG has grown to serve not only the greater New Jersey area, but also a vast portion of the United States. With branch offices up and down the East Coast and its corporate office in Ocean Township, NJ, Advisors Mortgage has established itself as a pillar of excellence in the mortgage industry. Our immense experience is our greatest asset and is the foundation of the success of the company and every Advisors branch and loan officer.
FULL EAGLE FHA UNDERWRITER
In 2005, Advisors Mortgage Group was designated by the Federal Housing Authority as a Full Eagle FHA Underwriter. As a Full Eagle, Advisors has been able to expand its loan volume by approving loans which a majority of the competition could not even dream of. We have built a platform for a seamless and stress-free mortgage process for all of our customers, and we have that same mission throughout all of our offices. We understand that success cannot be attained without teamwork and communication, two of our most important strengths. So if you are looking to apply for a new loan, refinance an existing loan, have questions or require any assistance during the loan process, please do not hesitate to call me: 631-804-9044 and I will be only too happy to help.
VA LOANS MADE SIMPLE
YOU SERVED OUR COUNTRY WITH HONOR. Now let the VA Loan program pay tribute to your service.
VA Loans are guaranteed by the U.S. Department of Veterans Affairs, also known as a government loan.
- VA purchase loans allow eligible Veterans 100% home financing
- No monthly mortgage insurance premiums
- Streamline refinancing available
- No downpayment required for qualified borrowers
- Up to 100% seller paid costs on purchases
- No prepayment penalties