HOME PURCHASE
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Buying a home involves finding the property, securing financing, making an offer, getting a home inspection, and closing on the purchase. National and state first-time buyer programs may be useful if you can't afford a high down payment. Once you've moved in, it's important to maintain your home and keep saving.
HOME REFINANCE
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A refinance, or "refi" for short, refers to the process of revising and replacing the terms of an existing credit agreement, usually as it relates to a loan or mortgage. When a business or an individual decides to refinance a credit obligation, they effectively seek to make favorable changes to their interest rate, payment schedule, and/or other terms outlined in their contract. If approved, the borrower gets a new contract that takes the place of the original agreement.
Borrowers often choose to refinance when the interest-rate environment changes substantially, causing potential savings on debt payments from a new agreement.
FIXED RATE
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A fixed-rate mortgage has an interest rate that remains the same for the life of the loan. Fixed-rate loans are the most popular type of financing because they offer predictability and stability — you’ll never be surprised by the principal and interest charges in your monthly mortgage payment, because they’ll stay the same for the entire loan term. (Your total monthly payment, which includes homeowners insurance and property taxes, might have small fluctuations due to changes in those costs.)
The most common type of fixed-rate mortgage is a 30-year loan, but you’ll see offerings for 20-year, 15-year and 10-year loans, too. Many lenders also offer flexible terms between eight years and 30 years.
ADJUSTABLE RATE
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An adjustable-rate mortgage has an interest rate that changes periodically with the broader market. An ARM starts with a low fixed rate during the introductory period, which typically is three, five, seven or 10 years. When the introductory period expires, the interest rate changes regularly, based on a benchmark index.
If the index is lower than when you got the loan, your rate and mortgage payment will decrease.
But if it's higher, your rate and mortgage payment will go up.
ARM rates continue to change periodically after the introductory period — usually once every six months — until you sell the home, refinance or pay back the mortgage in full. ARMs usually have 30-year terms.
HOME EQUITY LOAN
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A home equity loan is a loan in which the borrower uses the equity of their home as collateral for the loan. The value of the property determines the loan amount.
Residential property is a valuable financial investment. In addition to preserving value, homeownership also offers the opportunity to use equity with the help of a home equity loan to secure low-cost funds in the form of a second mortgage. Another way to leverage the value of your property is through a Home Equity Line of Credit (HELOC).
HOME EQUITY LINE OF CREDIT
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A HELOC is a type of revolving credit line that allows you to use your house as collateral in order to borrow against the equity in your home. Like with a credit card, you'll have a credit limit you can borrow up to repeatedly as you make purchases and pay down your outstanding balance. As such, you can borrow again as needed, and you can borrow as little or as much as you like up to your credit limit.
HELOC lenders will generally let you borrow between 60% and 85% of your home's current appraised value, minus your remaining mortgage balance. For example, suppose your house is worth $350,000 and you still owe $110,000 on the mortgage. You have $240,000 in home equity, so you might be able to borrow as much as $204,000, depending on your income, lender, your creditworthiness and other factors. HELOCs usually come with variable rates, although fixed-rate HELOCs are becoming more common. A HELOC term can last up to 30 years and involve two periods:
Draw period:
Typically, you can draw on the line of credit for 10 years. During that time, you make interest-only payments on the amount you've borrowed, although some lenders will let you make payments on the loan principal too.
Repayment period:
When the draw period ends, the HELOC closes; at that point, you have to either repay the balance (generally over a 20-year period) or refinance the loan.
FHA
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What Is an FHA Loan?
An FHA loan is a loan offered by the U.S. Federal Housing Administration, which means it’s backed by the government. When you apply for an FHA loan, you can get more favorable loan terms, which means you can create a budget that’s easier for you and your family to stick to.
FHA loans can potentially be a good way for homeowners who don’t have the best credit score to get approved for a mortgage loan. However, it’s important to keep in mind that there are key differences between FHA home loans and conventional mortgage loans.
What Are the Requirements for an FHA Loan?
An FHA mortgage makes becoming a homeowner feasible for people of all income levels since the government is guaranteeing the payment of your loan. Unlike most mortgage loans, there is no minimum income required to qualify for an FHA loan, but you do need to show that you can repay the loan.
VA
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A VA loan is one of the greatest benefits of military service available. To date, millions of people have used a VA loan to purchase a home. Although VA loans are guaranteed by the federal government, the VA doesn’t actually make the loan.
That’s why it’s important for you to choose a lender who puts your best interests first. After all, you’ve always put the interests of others ahead of your own; isn’t it time someone returned the favor?
There are two primary benefits of a VA loan: the borrower typically doesn’t need to make a down payment (certain restrictions apply), and there are no private mortgage insurance (PMI) requirements.
Additional benefits, as listed on the VA website, include:
VA rules limit the amount you can be charged for closing costs.
Closing costs may be paid by the seller.
The lender can’t charge you a penalty fee if you pay the loan off early.
VA may be able to provide you some assistance if you run into difficulty making payments.
You don’t have to be a first-time homebuyer.
You can reuse the benefit.
VA-backed loans are assumable, as long as the person assuming the loan qualifies.
Only the VA can determine your eligibility, but most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan, while spouses of military members who died while on active duty or as a result of a service-connected disability may also apply.
For more information about VA loans, including complete eligibility requirements, contact us today.
FIRST TIME HOMEBUYER
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The CalHFA Conventional program is a first-mortgage loan insured through private mortgage insurance on the conventional market. The interest rate on the CalHFA Conventional loan is fixed throughout the 30-year term.
The CalPLUS Conventional loan program comes with a slightly higher 30-year fixed interest rate, but you can combine it with the agency’s MyHome Assistance program for down payment help and Zero Interest Program (ZIP) for closing costs.
ZIP doesn’t charge borrowers interest for the assistance, which can be 2 percent or 3 percent of the purchase price. If you choose the higher assistance amount, you’ll receive a higher interest rate on the mortgage itself.
CalHFA and CalPLUS FHA loans
The CalHFA loan program is a loan insured by the Federal Housing Administration that comes with a 30-year fixed, low interest rate for a primary home. The FHA has specific borrowing and property requirements that must be met.
The CalPLUS FHA program is another FHA-insured loan that comes with a slightly higher 30-year fixed rate, but it’s paired with the ZIP closing cost assistance.
The CalHFA VA program is a loan insured by the U.S. Department of Veterans Affairs. It comes with a fixed, low interest rate for a 30-year term. The VA has its own requirements for eligibility.