With the wide range of loan options available, Preferred Lending Group (PLG) can help you choose the best program for your situation. Payments, customized length of term, time in your home and potential penalties are just a few concerns of many buyers.
PLG loan consultants are able to determine what is and is not necessary for you based on your circumstances, goals and paperwork. With your input, we select and tailor your loan product to fit you. General overviews of home loan financing options are as follows:
Conventional Fixed‐rate Mortgages
A fixed product means you have the same rate for the term of the loan. For example, if your rate is 4% and your term is 30 years, then your payment will be a fully indexed payment at 4% for 30 years and will always be the same. Possible options include:
- 15 year fixed
- 20‐year fixed
- 30‐year fixed
- 40‐year fixed
- Customized number of years
The longer the term of your loan the lower the payment will be. Conversely, the shorter your term, the shorter time in which to pay it off and the larger the payment will be. These are usually the best option for those planning to stay in the home for a long time.
Adjustable Rate Mortgages or ARMs
As the name implies, adjustable rate mortgages have the potential for your payment to change or adjust based on a margin and index usually after a specified fixed period. The adjustment depends on the loan terms which will be outlined as follows:
- 3/1, fixed rate for 3 years
- 5/1, fixed rate for 5 years
- 7/1, fixed rate for 7 years
- 10/1, fixed rate for 10 years
These then can adjust on a monthly, bi‐annual or annual basis and are usually the best option for those anticipating to stay in the home for a relatively short period.
Home Equity Loans / Line of Credit
A home equity loan is a second mortgage on your property with a fixed interest rate and payments that include both principle and interest.
A similar loan product is Home Equity Line of Credit (HELOC) is set up as a credit card – allowing you to draw funds whenever you need money during you’re a specified period. There is a minimum monthly payment based on how much you have drawn and is an interest only payment.
Interest Only Mortgage
A typical mortgage payment is a blend of principal plus interest. The principal goes toward repayment of your mortgage principle (the amount originally borrowed) and the interest is what the lender charges for the use of the money.
With an interest‐only mortgage, you pay only interest every month for a fixed period of time. Once this period expires, you must repay all of the principal, plus interest over the remaining term.
Jumbo mortgages are home loans exceeding conforming loan limits. Jumbo loans are often used to purchase high‐priced or luxury homes. Typical candidates for jumbo mortgages typically have lower debt‐to‐income ratio, high credit scores, and a larger than usual (or required) down payment.
Federal Housing Administration (FHA) Loans
FHA loans are mortgages backed by the Federal Housing Administration (FHA). FHA borrowers pay for mortgage insurance ‐ protecting the lender from loss if the borrower defaults on the loan. As such, lenders often offer FHA loans with attractive interest rates and relatively flexible qualification requirements.
Veterans Affairs (VA) Loans
Issued by qualified lenders, VA loans are mortgages guaranteed by the US Department of Veterans Affairs (VA). These loans offer long‐term financing to eligible veterans or their surviving spouses. The intent of the VA loan program is to provide home financing to eligible veterans in areas where private financing is not generally available and help veterans purchase properties with no down payment.
Biweekly payments are when you make a payment on your mortgage every two weeks instead of once a month. Each of these payments is equal to one‐half of a normal monthly payment. By making biweekly payments, you end up making an extra payment over the course of each year. You also pay less interest in the long term, because your payments are applied to your principal balance more frequently.
These are merely general introductions to popular loan products. Each mortgage also carries detailed requirements and implications that could affect its applicability and effects on your financial situation.
PLG’s experienced loan consultants are eager to share the advantages and disadvantages of each program and answer any questions related to these and other home loan programs. Please contact us to discuss these options and your home loan needs.