The Adjustable Rate Mortgage

Have you noticed the many headlines about rising home prices, decreasing foreclosure rates, and “the lowest ever” mortgage rates? Everyone is telling you that now is the time to buy, and they probably have been for months; well, they are right. As a first time homebuyer, or even a repeat buyer, you have many options available to you- Government, Conventional, and Non-Conventional loans. There are different factors and terms such as interest and the length of the loan itself for each of these types of loans and this blog is discussing a product we offer called an adjustable rate mortgage.

Adjustable Rate Mortgages (ARM) typically offer lower interest rates than a fixed rate mortgage because the interest rate is only guaranteed for a specific time frame. ARMs are useful for buyers who are trying to maximize their purchasing power or for buyers who plan on owning a home for a specific period of time. ARM time frames are traditionally for 10, 7, 5, 3, 2, and 1 years, and 6, 3 and 1 month. All of these loans are for a 30-year term and some may be available for a 40-year term. 

Every ARM has a Life Cap which provides a limit on how high the rate can adjust after the initial period has concluded and typically a yearly adjustment which also limits how much the rate can fluctuate from year to year.  Once your initial interest rate period has been completed, the new interest rate is calculated on the anniversary of your mortgage by adding a pre-determined margin to an index.  The index is the instrument we use to determine the future interest rate. Typical indices are the Treasury Bill (T-Bill), London Interbank Offered Rate (LIBOR), and the Monthly Treasury Average (MTA). Your ARM can also be refinanced at any time into a fixed rate or another ARM product.

There are a few things to consider when looking at an adjustable rate mortgage; what’s your time frame for living in that particular house? This is a great mortgage product and it has become increasingly popular, but whether or not it’s right for you is dependent on what you need and your specific situation. We will sit down with you to help you decide what would best for your financial situation. At Intercoastal Mortgage company we pride ourselves in providing you with only the best quality you deserve, contact me to obtain the home of your dreams.

Is Their Asking Price Appropriate

If you're ready to purchase a new home, understanding the value of that property plays a critical role in the process. The asking price for a home is not always equal to its fair market value; because we finance new home purchases, it is important  to determine the actual value of the home to get the correct financing for the value.  By consulting with real estate professionals, property appraisers, and mortgage lenders, you can determine the actual value of the home, regardless of the listing price. It is important to establish the FMV (fair market value) of that specific house you're interested in, since this price could be lower than the asking price, giving you an advantage when making an offer.

The price which the home you are looking for should sell for is called its Fair Market Value (FMV). The FMV is based on criteria such as square footage value, upgrades, assessed value, and a comparative market analysis (CMA). The CMA is calculated by comparing other homes on the MLS (Multiple Listing Service) either in the neighborhood you specify or by the attributes of that particular house. They look at houses already sold as a determination of accurate pricing. The square footage value gives continuity to some of the variables of houses in the same neighborhood; such as lot size or improvements needed/completed. Assessed value adds a third dimension to give a comprehensive picture of what the fair market value is for a home.

The home sale price is what the seller of the home is asking the buyer to pay in order to purchase the home. This includes the financed amount and the amount of the down payment. In a previous week's blog, we discussed the advantages of mortgage pre-approval. Through this process your mortgage lender will assess your financial situation and calculate a maximum affordable sale price. This indicates what mortgage amount you can realistically afford. Assuming you enter the home buying process with a pre-approved mortgage amount, knowing the fair market value of the houses you are interested in will allow you to align your financial picture with the right property.

Often people think a house is out of their reach because they can't afford the asking price. What they may not know is that with the help of mortgage and real estate professionals, they may be able to own the home they want in their desired neighborhood by understanding the Fair Market Value. At Intercoastal Mortgage Company, we help you secure a loan that fits your needs, based on your income and budget. Homeownership is a phone call and application away, so contact me to help you in the loanprocess and obtain your next home.

Government Loans You May be Eligible For

There are many different types of loans in the market today. Some are privately held offerings and others are Government sponsored programs. This blog is discussing the loans we offer that are related to government programs. These loans aren’t only provided by the government; some are independent agencies that are insured by the federal government, and some are independent government agencies providing the actual loan.

Each type of loan has different guidelines; generally, government loans are either aimed at a specific group of people or designed to appeal to a specific demographic. They are designed to help people with homeownership. Let’s start by naming these loans:

·         Veterans Administration (VA)

·         Federal Housing Administration (FHA)

·         Virginia Housing Development Administration (VHDA)

As an independent agency of the U.S. Government, the Veterans Administration (VA) is responsible for the administration of various programs that benefit U.S. service personnel and qualified veterans. Although the VA itself doesn't make mortgage loans, it does guarantee the repayment of loans made to veterans. VA-guaranteed loans usually feature flexible terms, zero or low down payments and less restrictive qualifying requirements, making it easier for veterans to purchase homes. VA loans are also assumable, meaning that someone who is not a veteran could end up benefitting from the program as well.

As part of the U.S. Department of Housing and Urban Development (HUD), the FHA is primarily responsible for insuring residential mortgage loans made by qualified lenders. FHA loans are quite popular because the income and credit requirements are more lenient than those of conventional loans. Though commonly referred to as "FHA loans," the loans are not granted by the FHA, but the FHA insures the lender against loss. FHA loans are also assumable and require low down payments. FHA offers a fixed rate and  1, 3 and 5 year adjustable rate mortgages. Both fixed and adjustable programs require only a 3.5% down payment. The FHA maximum loan amounts vary for each area of the country. FHA is the original first time homebuyers program.

The Virginia Housing Development Authority (VHDA) is the state’s mortgage finance agency. Created in 1972 by the Virginia General Assembly, their mission is to help low and moderate-income Virginians attain quality, affordable housing. Their vision is to be the leading mobilizing force for affordable housing in Virginia.  VHDA’s flagship program is an FHA Plus program that allows qualified first-time home buyers to purchase with less than the traditional FHA down payment. 

As stated previously, we offer you many loans to help you obtain the home of your dreams. There are multiple loans and each one has a specific benefit or advantage for you. Call us and learn if you meet the requirements of any of these loans, thus benefit from the advantages it would provide you. A little research can make all the difference, but we’re here to help you in the home purchasing process from start to finish. Give me a call and let me assist you inpurchasing your next home.