In the past, prospective home buyers turned exclusively to their banks for their mortgage needs, but you now have more options at your disposal with the growing presence of mortgage brokers. Independent mortgage brokers are licensed mortgage specialists who have access to multiple lenders and mortgage rates(Prime Pioneer Capital Corp is a licensed mortgage broker by NYDFS). They essentially negotiate the lowest rate for you, and because they acquire high quantities of mortgage products, mortgage brokers can pass volume discounts directly on to you.
Bank: Chartered banking institution with personal banking, credit card, loan and mortgage services.
Mortgage broker: Licensed mortgage specialist with access to multiple lenders and mortgage rates. An intermediary whose commission is paid by the lender or borrower.
Pros and Cons:
Bank: Banks allow you to consolidate your services with a provider you have an ongoing relationship with and have deemed trustworthy. Banks can only access and offer you their own rates and products. Banks will regularly give discounts on their posted mortgage rates; however, you are responsible for this negotiation.
Mortgage Broker: Mortgage brokers essentially ‘shop’ around, negotiate for you, and present the lowest rate on the market. Volume discounts achieved by mortgage brokers are passed directly to you. Mortgage brokers are a less familiar avenue, and first-time home buyers would not have pre-existing relationships with them.
Although banks can offer some discounting for consolidating your services with them, there are many advantages to using a mortgage broker.
One of the main benefits of using a mortgage brokers is that they have access to, and knowledge of, the entire mortgage market. They can advise which lenders will consider your case and which will not based on your individual circumstances. This is particularly useful for people with poor credit ratings. Mortgage brokers have access to lenders who specialize in servicing people with adverse credit, and can leverage relationships with mainstream banks.
Mortgage brokers can also access exclusive deals not available on the open market, or negotiate a better interest rate or lower application fees from the lender in some cases.
When you are trying to shopping around for your mortgage between different mortgage broker companies, make sure the one you choose is licensed, there are a lot “Broker companies” named themselves mortgage brokers!
A stated income mortgage loan application allows the borrower to declare their income without verification by the lender. These loans were designed to ease the application process for buyers have incomes which are difficult to document, such as the self-employed and those who depend on tips as a significant portion of their income. Its also known as No income verification loans.
A hard money loan is a loan of “last resort” or a short-term bridge loan. Primarily used in real estate transactions, its terms are based mainly on the value of the property being used as collateral, not on the creditworthiness of the borrower. Since traditional lenders, such as banks, do not make hard money loans, hard money lenders are often private individuals or companies that see value in this type of potentially risky venture.
Yes. But non-U.S. citizens must consider a number of factors when applying for a mortgage as well as distinct disadvantages, including additional lender requirements, higher borrowing costs and a more arduous approval process.
A home equity loan comes as a lump sum of cash. It’s an option if you need the money for a one-time expense, like a wedding or a kitchen renovation or purchasing another investment property.
Home equity lines of credit are a bit different. They are a revolving source of funds, much like a credit card, that you use as you see fit. Unlike home equity loans, they tend to have few, if any, closing costs and feature variable interest rates – though some lenders offer fixed rates for a certain number of years.
Most home equity lines have two phases: During the draw period – typically 10 years – you can access your available credit as you see fit. Many HELOC contracts require small, interest-only payments during this period, though you may have the option to pay extra and have it go against the principal.
After the draw period ends, you can sometimes ask for an extension. Otherwise, the loan enters the repayment phase. From here on out, you can no longer access additional funds and you make regular principal-plus-interest payments until the balance disappears. During the 20-year repayment period, you must repay all the money you’ve borrowed, plus interest at a variable rate. Some lenders give borrowers the option of converting a HELOC balance to a fixed interest rate loan at this point.
Let’s take 5/1 ARM as an example. A 5/1 ARM is also known as 5/1 hybrid adjustable-rate mortgage (5/1 hybrid ARM) begins with an initial five-year fixed-interest rate, followed by a rate that adjusts on an annual basis. The “5” in the term refers to the number of years with a fixed rate, and the “1” refers to how often the rate adjusts after that (once per year).
The 5/1 hybrid ARM may be the most popular type of adjustable-rate mortgage, but it’s not the only option. There are 3/1, 7/1, and 10/1 ARMs, as well. These loans offer an introductory fixed rate for three, seven, or ten years respectively, after which they adjust annually.
Not necessarily, but it will certainly help. It is possible to get a conventional mortgage with a FICO credit score as low as 620, and you can obtain a higher-cost FHA mortgage with a score in the 500s. However, be aware that the lower your score, the higher your interest rate will be. But No credit score is better than a bad credit score.
The short answer is that you can get a conventional mortgage with as little as 3% down, an FHA loan with 3.5% down, and a VA or USDA loan with no money down at all. However, with a conventional or FHA loan, you’ll have to pay private mortgage insurance, aka PMI, if your down payment is less than 20% of the home’s sale price. Normally for stated income loan, you need to prepare at least 20% down payment.
When interest rates are historically low, like they are now, a fixed-rate mortgage makes good financial sense. Not surprisingly, the vast majority of mortgages originated today are fixed-rate. That said, while a fixed-rate mortgage is the best choice for the majority of homebuyers, there are some circumstances where an ARM may be better. For example, if you expect to sell the house before the fixed-interest period ends and the rate starts to float, an ARM could end up saving you thousands of dollars. Or, during periods of falling interest rates, an ARM can allow you to get a low initial rate, and will save you money later if rates drop further. But if you want to go with Stated income loan, you may not have that many options, sometimes you may have to go with an ARM loan.
The amount of time it takes for a mortgage to get approved and financed will vary from lender to lender. When shopping around for mortgages, it’s extremely important to have an idea on average how long a mortgage lender is taking to get their loans closed. A top mortgage lender should be able to get a mortgage financed within 30-45 days from application.
It’s important to understand that there are many factors why a mortgage approval can be delayed. While going through the process of getting a mortgage, it’s important to stay in constant contact with the lender and make sure you get any requested document to the lender as soon as possible.
If a buyer does not cooperate with the lender in getting the required documentation in a timely manner, it may end up being the reason a closing is delayed or even worse, cancelled.
Depending on your situation, there are typically three or four parts of your mortgage payment:
Principal: Repayment of your outstanding balance.
Interest: Payment of the interest charged on the outstanding balance.
Taxes: See question 12. One-twelfth of your expected annual property taxes will be included in your mortgage payment, and deposited into your escrow account.
Insurance: This includes homeowner’s insurance, as well as any other hazard insurances you’re required to have, such as flood or windstorm. If you put less than 20% down on your loan, this can also include private mortgage insurance.
Based on these four items, your mortgage payments are sometimes referred to as PITI.