Everything you need to know about home loans in one place. Use our "frequently asked questions" section to learn everything about mortgages, refinancing, home equity lines of credit and more.
A fixed-rate mortgage is the simplest and most common mortgage for homebuyers. It simply has a fixed interest rate, that does not go up or down, throughout its lifespan. Since it never changes, a fixed-interest-rate mortgage isn't associated with indexes, margins, floors, or caps. As the interest rate is fixed, the monthly principal and interest payment are the same throughout the mortgage’s lifespan.
Read MoreCalculating a fixed mortgage rate is relatively simple: You take the annual figure and turn it into a monthly figure. To calculate the monthly fixed mortgage rate, just do the following steps:
change the annual rate to a decimal number by dividing it by 100;
take the resulting decimal figure and further divide it by 12; and
voila!, You have the monthly fixed mortgage rate.
Buying your first home is a challenging but important first step in securing your future. There are many financial products available on the market for first-time homebuyers. Each product has its target market, so it’s important to understand your needs so as to match them to the products on offer.
Read MoreYes. These programs assist with providing funds for down payment, closing costs, prepaids, principal reductions, and/or repairs. How much you get depends on whether you qualify, the area median income, and home prices.
Read MoreA Federal Housing Administration (FHA) loan is a loan with less stringent qualifications and low down payments. It’s part of the U.S. Department of Housing and Urban Development’s programs to help first-time homebuyers buy a home.
Read MoreA home equity loan (HEL) uses the part of the home that you own as security for a loan. For example, if your home is valued at $300,000 and you have a $200,000 mortgage outstanding, then you can use the $100,000 ($300,000 --$200,000) as collateral for a loan. Home equity loans are also known as equity loans and second mortgage loans.
Read MoreThe terms of a home equity loan (HEL) are usually akin to a simple fixed-interest loan.
Read MoreRegular loans usually require a 20% down payment on a home. First-time homebuyer programs like the FHA loan reduce this to as low as 3.5%.
The amount can vary according to the program on offer and to what extent you qualify for the grant.
Read MoreLike with most housing assistance programs, you can start at your local housing agency. You’ll be provided with a breakdown of the FHA loan-approved lenders in your area, whom you can apply to. If you qualify for the program, simply apply to these lenders. If you get more than one quote, you’re more likely to find a better deal.
Read MoreAn amortized loan is a debt that’s paid off over time in equal installments. Each payment pays off the interest and the principal.
In the beginning, the installments prioritize paying off the interest and a portion of the principal. Over time, the interest will become a small part of the installment, as the principal will have become a larger component.
Read MoreFinancing your home is a large investment, which is why most people need long-term loans to buy a home. Before searching for a home to buy or financing options, first get a good idea of your financial standing. Buying a home is a huge financial obligation, so ensure that:
Read MoreA variable interest rate is one that can go up or down based on an index. A variable interest comprises an index rate and a margin rate.
Read MoreThe FHA 7 year ARM is a hybrid mortgage that is guaranteed by the Federal Housing Authority. It is deemed a “hybrid” mortgage because it has a fixed interest rate in the beginning for 7 years and then switches to a variable interest rate. As with all adjustable rate mortgages (ARMS) the rate is composed of an index rate and the lender's margins.
Read MoreThe 7/1 ARM is a hybrid mortgage, it comprises years with a fixed interest rate followed by years with a variable rate. The “7” is the number of years with a fixed interest rate, the “1” represents the annual adjustment period.
Read MoreThe interest on both HELs and HELOCs are lower than credit card rates as they are secured by your home, which makes them an attractive source of funds. The main differences between the home equity loans and home equity lines of credit are:
Read MoreA home equity line of credit (HELOC), is a pool of credit you can draw from using your home equity as collateral. Your home equity is the difference between the value of your home and the mortgage balance. So if your home is valued at $250,000 and your mortgage is $150,000 then your home equity is at $100,000 ($250,000-$150,000).
Read MoreHome equity is value built up from paying down the mortgage of a home while it appreciates in price. It is the difference between the market price of a home and the debt attached to it like a mortgage. Home equity is the portion of your home that you actually own.
Read MoreA home equity loan is a second mortgage. It uses the equity in your home as security for a loan. The low-interest rate and substantial loan amount make it an attractive source of funding for various needs. To qualify for a home equity loan generally requires you to have the following:
Read MoreA cash out refinance uses your home equity to issue a new loan to replace the old one and give you a cash payout. Say your home is valued at $400,000 and your mortgage stands at $250,000 which means that your home equity is $150,000 ($400,000-$250,000). Using your home equity as collateral you can take out a new loan of $320,000, which will cover the $250,000 mortgage and get a cash payment of $70,000 ($320,000-$250,000).
Read MoreHome equity loans are more reliant on your home equity as security rather than on your credit score. So if you have equity in your home and bad credit you may still qualify for a home equity loan.You can get home equity loans from a vast number of lenders in the market.
Read MoreThere are several ways you can access your home equity such as selling your home, doing a cash out refinance, taking out a home equity loan, or opening a home equity line of credit. Turn the equity in your home into a source of cash to use as you see fit.
Read MoreWhenever a large expense comes up, home equity loans are a very tempting source of funds. You can pretty much use a home equity loan for whatever you like, which is what can make it perilous for people with no control over their spending habits.
Read MoreThe value of a home equity line of credit (HELOC) is determined by the home equity and the lenders acceptable level of combined loan to value (CLTV). The home equity has to be large enough to cover the requested loan, and the CLTV has to be at a sustainable level
Read MoreYes, it is possible to buy a home with no money down or down payment. There are a variety of loans in the market that cater to home buyers with different needs. To qualify for a no money down home loan you will need to have a good credit score and credit record
Read MoreAn adjustable-rate mortgage (ARM), also known as a variable-rate mortgage or tracker mortgage, is a loan with an interest rate that can go either up or down depending on market conditions. These market conditions are based on an underlying index like the federal funds rate, treasury bills, or LIBOR.
Read MoreBalloon loans are usually short-term and only a small portion of the principal will be paid by the end of the term. They look something like this, a $400,000 loan is to be amortized over 30 years but due in 5 years. The borrower will make payments like they are on a 30-year amortized payment plan, but the loan will be due in 5 years. The amortized payments will pay for mostly interest and a small portion of the principle, the balloon payment is likely to be close to the principal.
Read MoreA conventional loan is a loan that is not insured or guaranteed by the government. A conventional loan may be a fixed rate mortgage, variable rate mortgage or a hybrid ARM. Conventional loans are either conforming or non-conforming loans.
Read MoreFirst time home buyer grants are issued by federal, state and local housing agencies to help borrowers purchase a home easily. The programs are designed to lower the hurdles of acquiring a home, by paying the down payment.
Read MoreA 5-year ARM FHA mortgage is a loan with a fixed and variable interest rate that is guaranteed by the Federal Housing Authority (FHA). The loan is a hybrid adjustable-rate mortgage (ARM): it starts out with a fixed interest rate for the first five years, then the rate becomes variable. The loan comes with a guarantee to the lender that the FHA will pay it off if the borrower fails to pay.
Read MoreA fixed rate mortgage has a fixed term, fixed rate and is popular for its simplicity. The interest rate is fixed but the payment amount may change over time. This is because the payment amount includes interest and principal payment (which don’t change) along with taxes and insurance payments both of which may change
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