|
TWSB offers a wide range of loan types and programs. The three most popular loan types are as follows:
Conventional
Conventional loans are
separated by loan size, amounts up to $322,700 are referred to as conforming loans and loan amounts above this amount are called Jumbo loans. These loans are offered as fixed-rate, adjustable-rate, and balloon loans. Each has advantages and
some disadvantages. Borrowers with excellent credit may obtain a conventional loan with no down payment.
FHA
FHA loans are insured by the U.S. Department of Housing and Urban
Development (HUD). They are designed to make housing more affordable, particularly for first-time home buyers. Therefore, FHA loans typically permit borrowers to buy a home with a lower payment than conventional loans.
With FHA insurance, eligible buyers can purchase a home with a down payment of as little as 3% of the appraised value or
the purchase price, whichever is lower. In addition, qualifying standards are not as strict as those for conventional loans.
The current FHA loan limit in Northern Virginia is $268,800. However, FHA loan amount limits may vary by county. There
are two different FHA loan products available: fixed-rate and adjustable-rate loans.
VA
VA loans are guaranteed by the U.S. Department of Veterans Affairs. They are
designed to make housing affordable for eligible U.S. Veterans.
VA loans are available to veterans, reservists, active-duty personnel, and surviving spouses of veterans with 100%
entitlement. Eligible veterans may be able to purchase a home with no down payment, no cash reserve, no application fee, and lower closing costs than other financing options.
The maximum VA loan amount is currently $240,000. Fixed-rate loans are the only loans currently available through the VA.
Loan Products
The three most common loan products are fixed-rate,
adjustable-rate, and balloon loans.
Fixed-rate
Fixed-rate loans have interest rates that do not change over the life
of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan.
- With a fixed-rate loan, you will have predictable monthly mortgage payments for as long as
you have the loan.
- Fixed-rate loans may be a good choice if you are concerned that interest rates may rise,
since the interest rate on a fixed-rate loan will be a stable rate.
- On the downside, if rates fall, you may also find yourself paying a higher interest rate
than you would pay if you had an adjustable-rate loan.
Adjustable-rate
Adjustable-rate loans (ARM) have interest rates that are
adjusted periodically based on changes in an index. As a result, the interest rate on your loan and the monthly payment rises and falls with increases and decreases in overall interest rates.
- These mortgage loans must specify how their interest rate changes, usually in terms of a
relation to a national index such as (but not always) Treasury bill rates, and any rate caps.
- You may also qualify for a larger loan amount with an adjustable-rate loan than with a
fixed-rate loan because lenders often charge a lower initial interest rate on adjustable-rate loans than fixed-rate loans.
- Lower initial interest rates available with ARM loans may make home ownership more
affordable.
- An ARM loan may be a good choice if you expect your income to rise in the future, or if
you only plan to own the home for a few years. However, if interest rates rise, your monthly payments will rise.
- An interest rate cap limits the amount by which the interest can change either up or down.
Look for this feature when you consider an ARM loan.
Balloon Loans
Balloon loans are short-term, fixed-rate loans with fixed monthly
payments for a set number of years, followed by one large final balloon payment ("the balloon") for the remainder of the principal.
- Typically, the balloon payment may be due at the end of five or seven years.
- Borrowers with balloon loans may have the right to refinance the loan when the balloon
payment is due, but the right to refinance is not guaranteed.
- A balloon loan may be a good choice if you do not expect to own the home longer than the
initial 5 or 7 year term. Selling the home (and paying off the loan with the proceeds) before the balloon payment is due, means you don't have to come up with a large chunk of cash when the big balloon payment is due.
|
