Owning a home is the largest investment that you will make. Choosing the right type of mortgage is very important as well. Having the wrong mortgage or interest rate could cost you thousands of dollars. If you don’t have good working knowledge about mortgages, that is ok. Educate yourself and have a comprehensive understanding of them before you decide which mortgage fits you best.
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Most lenders require that your monthly payment range between 25-28% of your gross monthly income. Your mortgage payment to the lender includes four items… PITI. PITI is principal, interest, taxes, and home owner’s insurance. Remember, when you buy a home all interest is tax-deductible, so you will qualify for a major tax advantage that will effectively increase your take-home pay. Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% up to 43% of your gross monthly income. This is a general rule of thumb, but other key factors specifically determine your ability for a home loan. These factors are:
When you are buying a home a lender will ask you for a lot of different documents. They are doing this so they can completely evaluate your financial history. They want to make sure that you are a good borrower and that you can make the mortgage payment. The lender does not want the property back. Below is a list of financial documents a lender might ask for. Some things may not apply to you. If you are thinking about buying, I would get these documents in order before you meet with a lender so that you are prepared.
So what is the definition of a mortgage? A mortgage is a loan taken by a buyer to invest in land or property, with the value of the property as the “security” against the loan, until it’s settled or paid off. The typical period to pay off a mortgage is between 15 and 30 years, during which time you make monthly payments that go toward the principal and the interest of the loan.
There are many different types of mortgages to fit just about everyone’s needs. Looking at your financial history and current situation will determine which loans you may qualify for. There are two main types of loans:
Below is a list and description of the different types of mortgages.
An FHA loan is one loan insured by the Federal Housing Administration. The federal government backs (insures) loan for FHA approved lenders. They do this to reduce their risk of a loss if a borrower defaults (does not pay) their mortgage payments.
Highlights of an FHA Loan
HUD 203(K) Renovation Loan Program
The HUD 203k Renovation Loan Program is an excellent way to purchase a property and complete basic renovations and repairs without having to pay for it with your own money.
How HUD 203(k) Renovation Loan Program Works
Most people buying a home in Metro Atlanta will need some kind of financing (loan). Most mortgage financing plans offer only permanent financing. If renovations are involved, lenders will not complete permanent financing on the home until the renovations are finished. There are three basic steps when using the HUD 203(k) Renovation Loan Program:
The HUD 203K Renovation Loan Program allows the borrower to get one mortgage at a long term fixed-rate (or adjustable) rate. This mortgage allows anyone who is buying a home to purchase the home and renovate it all at once.
There are specific criteria for eligible homes for a HUD 203(k) Renovation Loan Program they are:
What is VA loan?
The US Department of Veteran Affairs exclusively designed Veterans Affairs (VA) loans to benefit veterans. It has created a set of rules and requirements to be eligible for this loan. VA loans can be used to purchase single-family residence, condos, townhouses, and manufactured homes.
Types of VA Loans
Home Loan Guarantee: If you are short of money to repay, the VA stands behind you to guarantee a portion of the payment.
Eligibility: Anyone who is a Veteran, spouse (if not remarried), National Guard members, or Active-duty personnel, or spouse (if not remarried) is eligible for VA loans.
Benefits of VA Loan
The process of applying for VA loans varies based on the type of loan you opt for.
People who are in the military, reserves, or retired, have the option to use a Veterans Administration Loan Program (VA). A VA loan is a loan program that allows buyers that have current or past military service to buy a home with no down payment or mortgage insurance. The misconception about a VA loan is that if you use it a homeowner will have to sell your home or pay it off before they can use the program again. In most cases that is true, but there are some cases where you can get a Second Tier Entitlement VA Loan.
Veterans and active-duty military are entitled to this program the second time around- they just need to accomplish the basic eligibility requirements. A Second-tier VA loan must still be issued by a VA approved lender.
The best way to see if you qualify for a second-tier entitlement loan is to talk with a mortgage broker who is knowledgeable about VA loans.
Georgia Dream Loan Program – Income Criteria
There is an income criteria to be eligible for the Georgia Dream Loan Program. Where you live will determine what the income qualifications are. If you live in the Metro Atlanta area which includes:
Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Cobb, Coweta, Dawson, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Haralson, Heard, Henry, Jasper, Lamar, Meriwether, Newton, Paulding, Pickens, Pike, Rockdale, Spalding or Walton Counties, your total family income cannot be greater than:
*Sales price of the home cannot exceed $250,000
If you live anywhere outside the Metro Atlanta area your income cannot be great then:
*Sales price of the home cannot exceed $200,000
Atlanta is trying to revitalize areas of downtown Atlanta and the beltline. A variety of mortgage loan programs are available to assist borrowers who want to buy in the revitalization areas. These programs are under the InvestAtlanta website. Just like the Georgia Dream, it does have income requirements. There are four different loan programs that have different criteria. These loan programs are:
Home Buyer Requirements from Invest Atlanta Website
What Type of Home Can I Buy?
What is Home Equity Conversion Mortgage work?
A Home Equity Conversion Mortgage is a Federal Housing Administration (FHA) insured mortgage program that allows seniors to convert the equity in their home to cash. A reverse mortgage is different from a traditional mortgage. A traditional mortgage the homeowner would make monthly payments. In a reverse mortgage, the homeowner does not make monthly payments to the lender. They will pay the loan back when one of three conditions take place. The homeowner dies, moves from their home, or does not honor the loan requirements such as paying homeowner taxes or maintaining the home.
A Home Equity Conversion Mortgage was designed to provide the borrower (homeowner) with a percentage, generally between 45-80% -depending on age), of the home's value. It also allows the borrower to retain ownership (title) to the home. The homeowner or heirs will never owe more than the home is worth. A reverse mortgage is primarily used for cash flow and the money the homeowner receives can be used for anything. To find out if you qualify, use a Home Equity Conversion Mortgage Calculator.
According to the U.S. Department of Housing and Urban Development (HUD) the amount a homeowner can borrow is based on:
The borrower has different options for getting the money. There are five basic payment plans and the most popular is a line of credit.
Basic Payment Plans
(From the website of U.S Department of Housing and Urban Development)
You can change your payment plan option for a fee of $20.
What are the Requirements?
According to the U.S. Department of Housing and Urban Development, there are three areas of requirements. They are borrower, property, and financial. The following are the criteria for a Reverse Mortgage (HECM).
These are just a few of the requirements for the loan. For more information about the requirements for a Reverse mortgage, requirements, and fees please click on the link below
A conventional loan is a loan that is not insured or guaranteed by the federal government. It is typically a fixed rate and term mortgage. These loans are for buyers with excellent credit.
Benefits of a conventional loan
Qualifications for a conventional loan
A Jumbo loan is any amount above conventional conforming loan limits. In monetary terms, any loan over $417,000. These limits are set by the Office of Federal Housing Enterprise Oversight (OFHEO) and are set annually.
Like today's conforming and FHA mortgages, jumbo mortgages are widely available. What’s different is that jumbo loans are often expensive. The reason jumbo loans are expensive is very simple, the government does not back jumbo loans and because they are a much higher risk.
General Guidelines – they can be changed depending on the lender
These are guidelines. Each lender may have some variations to these Jumbo guidelines. I would suggest talking to three different lenders that have jumbo loans.
A Physician Loan is a special product designed to meet the unique needs of recent graduates from medical school who want to become homeowners. Lenders realized they had neglected untapped potential by not making more exceptions for new physicians who were in debt from student loans but had incredible future earning potential.
The Benefits of Physician Loans are:
To qualify for a Physician Loan you should be one of the following: licensed medical doctors (MD), new doctors, incoming and existing residents, and fellows and medical students. Each Lender has specific guidelines and types of medical doctors that are covered.
This is a conventional renovation loan. It can be used for a primary residence or an investment property. In metro Atlanta, it has a maximum loan limit that cannot exceed $417,000. It is the best renovation loan out right now.
As you can see, there are many different loan choices out there. Finding the right one to fit your needs can be challenging. Take the time to talk to your lender about all of your options. If you have questions or need a lender, please contact me (link). I will be glad to assist any way I can.