Financing a Home Overview
Select the edit icon to edit your custom html
Many home buyers and home owners may not know what type of financing benefits them. Not all homes are the same and may require different types of loans. Is the property a single family residence, duplex, condo, manufactured home or a vacation property for example? Are you purchasing a home or are you refinancing your home? These are the kind of questions your lender will ask you to help narrow down the right loan for you
Fixed Rate Mortgage
A fixed interest rate is where the principal payment remains the same throughout the duration of the loan. On the contrary an adjustable interest rate may change over time. Fixed interest rates are the most popular for a home loan due to the appeal of a consistent mortgage payment amount.
Adjustable Rate Mortgage
An adjustable rate mortgage (ARM) is a interest rate that may change over time. Adjustable interest rates may change periodically, usually in relation to an index (ex. London Interbank Offered Rate “LIBOR”), and payments may “adjust” up or down accordingly. Unlike a fixed interest rate, homeowners aren’t guaranteed the same monthly mortgage payments for the duration of their loan.
Primary Residence
A primary residence is the main residence someone resides as their legal residence. The property can be an condo, a house, manufactured home or multiple units that you live in most of the year. Primary residences tend to qualify for the lowest mortgage rates appose from a investment or vacation properties. For your home to qualify as your primary residence, here are some of the requirements:
-
You must live there most of the year.
-
It must be a convenient distance from your place of employment.
In addition, once you’ve purchased the property, you must occupy it within 60 days post closing. If you utilize the a VA loan, and you’re on active duty, your spouse can satisfy the occupancy requirement.
If you plan to turn the property into a rental property within 6 months of purchasing a home, you must classify it as an investment property.
Products Available: All loan products – Conventional, Conventional High Balance, Jumbo, FHA, USDA, VA and Reverse Mortgage
Programs Available: Down payment assistance and closing cost assistance (CA, NV)
Vacation Property
When purchasing a vacation property, also known as a second home, you may need a higher credit score to qualify. You may also receive a higher interest rate due to the increased risk for the lender. Depending on the loan amount and fico score, you may need to provide a 10% - 20% down payment. A second home must have the following characteristics:
-
It must be a reasonable distance away from your primary residence.
-
It must be exclusively under your control and not subject to a rental, time-share or property management agreement.
-
Must be accessible by car.
Products Available: Conventional, Conventional High Balance and Jumbo
Investment Property
An investment property is known as non-owner occupied. Many investors purchase a home or multifamily homes and plan to use as a rental and generate income. Investment properties are not limited to purchasing and feature cash out financing options as well. It typically requires a large down payment and more LTV restrictions. Mortgage rates tend to be higher than your primary residence, due to the higher risk the lender must take on.
You must report all income generated from your rental property on your tax return. The owner may also deduct expenses such as the cost of materials to maintain the property, interest and taxes.
Products Available: Conventional, Conventional High Balance and Jumbo