To start off our discussion of real estate financing, the first thing we're going to look at are the different types of loans available for a home mortgage. Follow the link below to check them out:
http://www.thetruthaboutmortgage.com/mortgage-loan-types-home-loan-types/
The first thing we'll look at is the subject of conforming vs. non-conforming loans. A conforming loans is in accordance with all of the Fannie Mae and Freddie Mac requirements and is lower than $417,000 or $625,500 in the lower 48 and Hawaii/Alaska, respectively. Anything that is non-conforming will be at a higher mortgage rate than a conforming loan and is considered to be a jumbo loan.
Next we'll look at the difference between conventional loans and government loans. Conventional loans can be either jumbo (non-conforming) or conforming loans. The difference is that they are independent of the government (not insured by the FHA). Government loans are just that, certified government loans that back the loan through the FHA to insure it against default to protect lenders and to help get people into their first home that would not ordinarily qualify for a loan.
And lastly, we'll talk about loan programs...how we actually make our monthly mortgage payments. There are many types of loans and we'll explorer just two here: fixed-rate and adjustable rate.
A fixed-rate mortgage is exactly that, it has a fixed interest rate. The loan payment amounts will never change over the life of the loan unless, of course, you refinance some time in the future to lower your loan payments.
And adjustable-rate mortgage is, you guessed it, a mortgage where the interest rate varies over the life of the loan. This variable interest rate usually follows a 6-12 month pattern and follows the some national rate, usually the US Inflation Rate. Also incorporated in this loan are floors and ceilings that protect the lender (from the rate dropping too low) and borrower (from the rate getting too high).
Now that we've talked about loans and payments, I added a loan calculator at the following link:
http://homes.yahoo.com/calculators/amortization.html
Let's run an example on the calculator. A $480,000 loan for 30 years (360 months) at 3.99% annual interest. The purchase price of the property was $600,000, meaning that our down payment was $120,000 (20%). This calculator has the options for hazard premiums, taxes, and private mortgage insurance, but for simplicity sake, we're going to ignore those for the time being. After plugging in all of this data to the calculator, we realize that our monthly mortgage payments are going to be $2,288.83 a month for 30 years. This calculator will even break down the difference between interest payments and principal payments. And as always, we could decrease these payments and the number of payments by paying early to avoid additional interest.
http://www.thetruthaboutmortgage.com/mortgage-loan-types-home-loan-types/
The first thing we'll look at is the subject of conforming vs. non-conforming loans. A conforming loans is in accordance with all of the Fannie Mae and Freddie Mac requirements and is lower than $417,000 or $625,500 in the lower 48 and Hawaii/Alaska, respectively. Anything that is non-conforming will be at a higher mortgage rate than a conforming loan and is considered to be a jumbo loan.
Next we'll look at the difference between conventional loans and government loans. Conventional loans can be either jumbo (non-conforming) or conforming loans. The difference is that they are independent of the government (not insured by the FHA). Government loans are just that, certified government loans that back the loan through the FHA to insure it against default to protect lenders and to help get people into their first home that would not ordinarily qualify for a loan.
And lastly, we'll talk about loan programs...how we actually make our monthly mortgage payments. There are many types of loans and we'll explorer just two here: fixed-rate and adjustable rate.
A fixed-rate mortgage is exactly that, it has a fixed interest rate. The loan payment amounts will never change over the life of the loan unless, of course, you refinance some time in the future to lower your loan payments.
And adjustable-rate mortgage is, you guessed it, a mortgage where the interest rate varies over the life of the loan. This variable interest rate usually follows a 6-12 month pattern and follows the some national rate, usually the US Inflation Rate. Also incorporated in this loan are floors and ceilings that protect the lender (from the rate dropping too low) and borrower (from the rate getting too high).
Now that we've talked about loans and payments, I added a loan calculator at the following link:
http://homes.yahoo.com/calculators/amortization.html
Let's run an example on the calculator. A $480,000 loan for 30 years (360 months) at 3.99% annual interest. The purchase price of the property was $600,000, meaning that our down payment was $120,000 (20%). This calculator has the options for hazard premiums, taxes, and private mortgage insurance, but for simplicity sake, we're going to ignore those for the time being. After plugging in all of this data to the calculator, we realize that our monthly mortgage payments are going to be $2,288.83 a month for 30 years. This calculator will even break down the difference between interest payments and principal payments. And as always, we could decrease these payments and the number of payments by paying early to avoid additional interest.
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