Purchase or Refinance Homes, Second Homes & Investment Properties
Purchase or Refinance Your Home with First Mortgage Services
Whether you seek a mortgage loan for the purchase of a home or refinancing your present mortgage, First Mortgage Services will evaluate your financial situation and recommend a mortgage loan that will best meet your needs. Factors to consider when selecting a mortgage loan program include an applicant’s credit profile, funds available for down-payment and settlement costs, property type, and property location.
Our loan officers would be happy to review your options with you, so contact us or call our office today at (301) 722-3623
Understanding Purchasing and Refinancing with First Mortgage Services
A purchase money mortgage loan is necessary to finance all or part of a purchase of a home. First Mortgage Services has access to various mortgage loan programs. A mortgage loan program can be arranged that will accommodate your present financial circumstance, as well as your future monthly budget.
Refinancing your home is different in that you already have an existing mortgage loan which you are making monthly payments and may want to change the terms. Consider refinancing when your financial circumstances change significantly. Here are some reasons borrowers may decide to refinance the mortgage loan:
• Reduce interest rate and monthly payment
• Consolidate debt
• Convert from an adjustable interest rate to fixed interest rate
• Obtain cash-out for college education or home improvements
• Take advantage of home equity
First Mortgage Services will evaluate the terms of your refinance mortgage loan request to ensure that you will realize a benefit from the transaction.
Summary of Available Mortgage Loan Programs
Fixed Rate and Adjustable Rate Mortgages
Fixed rate mortgages (FRMs) are traditional mortgage loans that have a set interest rate and monthly payment. The schedule of principal and interest is amortized over the length of the loan term. The principal interest portion of the monthly payment will not change over the life of the loan term.
Adjustable rate mortgages (ARMs) have interest rates that could change periodically over the term of the loan. An increase or decrease in the interest rate will cause the monthly payment to increase or decrease. Many ARMs offer lower initial interest rates than FRMs, allowing the buyer to have a lower initial payment. Borrowers carry the risk of a rising interest rate for the term of the loan.
Conventional Mortgage Loans
A conventional mortgage is one that does not fall under any government program that guarantees or insures it, such as FHA or VA. Conventional mortgage loans can be either in the form of fixed or adjustable interest rates. Borrowers must follow guidelines set forth by Fannie Mae and Freddie Mac. The minimum down-payment requirement for a conventional mortgage loan is at least three percent (3.0%). Lenders require private mortgage insurance (PMI) if the loan exceeds 80 percent of the lower of the property’s value or purchase price. Use a conventional loan to finance a primary residence, vacation home, or a one- to four-family investment property.
FHA Mortgage Loans
Loans backed by the Federal Housing Administration (FHA) are for the purchase of a home or refinance of an existing mortgage. The property must be the borrower’s primary residence for a purchase money mortgage loan. The program permits both rate/term and cash-out refinance mortgage loans, and the property can be a one- to four-family residential property. The minimum down-payment for a purchase money mortgage loan is 3.5 percent, which can come from the borrower’s own funds or liquid assets, an eligible gift, or a combination of both. The FHA requires mortgage insurance on its loans. Compared to conventional loans, these are slightly more flexible when evaluating credit history and debt-to-income ratios. Interest rates for FHA loans can be either fixed or adjustable.
VA (Veteran’s Administration) Mortgage Loans
Eligible veterans can finance their home for up to 100 percent of its value. Use the VA mortgage loan program to either purchase or refinance a home. First Mortgage Service can assist in determining if the veteran applicant is eligible to obtain a Certificate of Eligibility (COE). Unlike other loan programs, VA mortgage loans do not require private mortgage insurance if the loan exceeds 80 percent of the property value. This results in lower monthly payments compared to other programs, with fixed and competitive interest rates. Borrowers can expect closing costs and processing time for a VA mortgage loan to be comparable to other loan programs.
USDA Rural Development Guaranteed
The USDA offers a mortgage loan program only as a fixed interest rate for a 30-year term. First Mortgage Services will review your circumstances to determine eligibility based on household income, availability of liquid assets, and property location rules. You do not need to be a first-time homebuyer to be eligible, and up to 100 percent financing is available based on the appraised value. If a home appraises for more than the purchase price, you may also finance all or a portion of the settlement costs. Use a USDA loan to finance either the purchase of a home or the no cash-out refinance of an existing USDA loan. Mortgage insurance is required; however, the monthly amount is generally lower compared to other mortgage loan programs.
FannieMae HomeReady® and FreddieMac Home Possible®
Conventional mortgage loan programs from FannieMae and FreddieMac are relatively new. Designed to assist the first-time homebuyer, these programs allow for a down-payment of just three percent. The source of the down-payment can be your own funds or a gift from an eligible source. The lenders require private mortgage insurance, but at a reduced rate. Both programs require completing a FannieMae or FreddieMac homebuyer education course.
Renovation Mortgage Loans
First Mortgage Services offers renovation or rehab loans under the FHA 203(K) or the FannieMae HomeStyle program. Use these to purchase a home and borrow funds for renovation/rehab within a single mortgage loan. This eliminates the worry of multiple mortgage loans or settlements. The maximum amount of financing is slightly different between the FHA 203(K) and FannieMae HomeStyle programs. A licensed contractor must complete the renovation/rehab work.