Types of Loans

The best loan can either be the loan with the lowest total costs, least long-term monthly payment, the least initial monthly payment or the quickest equity build-up depending on your situation.

WHAT ARE FIXED AND ADJUSTABLE RATE MORTGAGES?

FIXED RATE MORTGAGES
These programs are typically either on a 15 year or 30 year amortization or repayment schedule. These programs provide the most security in the sense that the required monthly principal and interest payments will not change for the life of the loan. This is because the interest rate is fixed for the entire life of the loan.

ADJUSTABLE RATE MORTGAGE
All of ARM programs are based on a multiple year amortization. These loans are referred to as adjustable rate mortgages (ARM’s), because the interest rate will change or adjust on a predetermined schedule. ARM’s have an initial fixed period during which the interest rate will not change or adjust. After this initial period, the interest rate will change or adjust based on a market index plus a margin.

Conventional Loans

If you have good to excellent credit and a down payment of at least 5%, then a conventional loan may be right for you. Mortgage insurance applies for any loans with less than a 20% down payment. Conventional loan products include but are not limited to:

THIRTY-YEAR FIXED RATE MORTGAGE

The traditional 30-year fixed-rate mortgage has a constant interest rate and monthly payments that never change. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, then adjustable-rate loans are usually cheaper. As a rule of thumb, it may be harder to qualify for fixed-rate loans than for adjustable rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run, because you can lock in the rate for the life of your loan.

FIFTEEN-YEAR FIXED RATE MORTGAGE

This loan is fully amortized over a 15-year period and features constant monthly payments. It offers all the advantages of the 30-year loan, plus a lower interest rate—and you’ll own your home twice as fast. The disadvantage is that, with a 15-year loan, you commit to a higher monthly payment. Many borrowers opt for a 30-year fixed-rate loan and voluntarily make larger payments that will pay off their loan in 15 years. This approach is often safer than committing to a higher monthly payment, since the difference in interest rates isn’t that great.

ADJUSTABLE RATE MORTGAGES (ARM)

When it comes to ARMs there’s a basic rule to remember…the longer you ask the lender to charge you a specific rate, the more expensive the loan. Types of ARM’s include:

HYBRID ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)

These increasingly popular ARMS—also called 3/1, 5/1 or 7/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a “5/1 loan” has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable-rate loan, based on then-current rates for the remaining 25 years. It’s a good choice for people who expect to move (or refinance) before or shortly after the adjustment occurs.

ANNUAL ARM

This loan has a rate that is recalculated once a year.

MONTHLY ARM

With this loan, the interest rate is recalculated every month. Compared to other options, the rate is usually lower on this ARM because the lender is only committing to a rate for a month at a time, so his vulnerability is significantly reduced.

FHA Loans

If you have minor credit issues, your debt-to-income ratio is a bit high, you need income from a non-occupying parent or you have little to no money to put down, an FHA loan could be a great option.

Whether the house is move in ready or in need of repair, we can help streamline the application process for you to help you get the funding you need. The FHA, or the Federal Housing Administration is not a lending institution. It provides insurance to lenders who are willing to grant mortgages to a wider range of applicants, allowing them to become homeowners or refinance their existing mortgages.

WHAT IS MORTGAGE INSURANCE?

Mortgage insurance works much like any other type of insurance policy you may have. Considering the amount of money at stake, banks like to have some guarantee that if you are unable to continue making payments on your loan, they will recoup at least a portion of their losses. Most mortgage insurance companies have very strict guidelines for a lender to follow making it difficult for people with a less than stellar credit score to secure funding.

The FHA promotes home ownership by overlooking some flaws when they approve a mortgage. This gives the lender the peace of mind to go ahead with the application, knowing that the FHA is backing it. You will be required to make an initial payment towards your mortgage insurance of about 1.75% of the loan amount. In addition, there will be a monthly premium, MIP, on your mortgage statement each month. The amount of insurance you pay is directly related to how much of a down payment you make on the home. The more of your own money invested, the less the insurance premiums.

The funds collected from the insurance premiums are used by the FHA in the event that you are unable to continue with your loan payments. Having that kind of security behind you makes a lender more willing to work with you, despite possible flaws in your credit history.

VA Loans

As a veteran himself, Berto Garcia has used a VA loan for a home purchase in the past so he can tell you first-hand that it most definitely is a great product! If you’re an eligible veteran and have little or no money for a down payment, then a VA loan is for you.

In order to qualify for a VA mortgage you must have been willing to make the ultimate sacrifice for your nation. If so, then one unique benefit afforded to you is access to the Veterans Affairs Home Loan Program.

There are 3 primary benefits of a VA Home Loan:

  1. No Down Payment
  2. No Private Mortgage Insurance
  3. Competitive Interest Rates

The VA mortgage offers 100% financing to veterans and their spouses for the purchase of owner occupied homes. Something some people don’t realize is that they can use their VA benefits to buy up to a 4-family unit. You could live in one unit and have 3 other people pay your mortgage, even with no down payment!

In addition to there being no down payment, veterans do not have mortgage insurance on the loan. There is a funding fee that ranges from .5 to 3.3%. The funding fee is waived for a veteran that receives a minimum of 10% VA disability compensation.

Be sure that you have your DD-214 form and we can order your Certificate of Eligibility for you. This is the only additional paperwork you will need to provide us with in order to process your loan.
If you are a veteran or eligible surviving spouse, you can become a homeowner by taking advantage of this government-backed loan program!

Refinance

When the value of your home rises or the interest rates drop is the ideal time to refinance your mortgage.

Refinancing your mortgage simply means that you have found a better deal on a home loan, and want to use those terms and rates to pay off your existing mortgage. You may be curious about the advantages of refinancing your home, or be ready to get locked into a rate. Either way, the Garcia Mortgage Team will be by your side to walk you through the process from beginning to end.

We will help you decide if refinancing your home now is the best financial path for you. We will work with you to determine what your goals are and help you choose which refinance mortgage will help you meet your needs.

WHEN IS IT A GOOD TIME?

When the value of your home rises or the interest rates drop is the ideal time to refinance your mortgage.

If done right, refinancing your mortgage can lower your monthly payments, reduce the total amount owed to the bank or make good use of the equity you have built into your home. The Garcia Mortgage Team will discuss all of the highlights and pitfalls of refinancing to figure out if it is the right choice for you.

If falling interest rates are your motivation for considering refinancing your home, you have two options on how to take advantage of that.

  1. You can lower your monthly payments and keep your current repayment terms.
  2. You can keep your monthly payments at the same amount and shorten the length of your mortgage.

After speaking with the Garcia Mortgage Team about your long term goals and short term needs, you will have a clear understanding of which option is best for you.

You may also consider refinancing if the value of your house has made a significant increase. This is a good time to refinance the mortgage and use that equity to be paid towards other debts. You can even use the extra money on home improvement projects, further increasing the value of your house.

WHAT ARE THE REASONS TO REFINANCE?

If your monthly mortgage payment is leaving you strapped for cash, a refinance loan will be useful. If you make the choice to refinance with new terms and a lower rate, you reduce the monthly payments. You are starting from the beginning of the loan again, but this time it may be easier to handle with more cash left over at the end of the month.

Long term planners like the idea of refinancing to change the terms. If the monthly payment is within your budget, you can choose to refinance to shorten the length of the loan. This saves you thousands of dollars in interest fees and frees up equity faster allowing you to walk away with more cash in your pocket if you decide to sell before the loan is finished.

Jumbo Loans

Do you need a loan that is greater than $417,000? We are here to help with an excellent selection of Jumbo Loans up to $2,500,000.

The jumbo mortgage financing industry is always in a state of flux as the supply and demand for these particular loan products can change due to outside market conditions. A good rule-of-thumb to remember when applying for a non-conforming loan is to have your paperwork organized, as well as a good explanation prepared for anything that may raise potential questions by an underwriter about your ability to repay the mortgage over the term.

WHY ARE RATES HIGHER WITH JUMBO MORTGAGES?

The rates are typically higher with Jumbo Mortgages due to the amount of risk associated with financing a larger property that may be more difficult to sell and recoup losses in the case of a default.

WHAT ARE THE DOWN PAYMENT REQUIREMENTS FOR JUMBO MORTGAGES?

Typically, down payments for non-conforming loan amounts can be 20% or higher of the purchase price. Generally speaking, the larger the purchase price, the more money the borrower will have to invest as a down payment.

DO I HAVE TO PAY PRIVATE MORTGAGE INSURANCE ON A JUMBO MORTGAGE?

Private Mortgage Insurance (PMI) is only required if the Loan-to-Value (LTV) is greater than 80%.

H.A.R.P. Refinances

If you’re not behind on your mortgage payments, but have been unable to get traditional refinancing because the value of your home has declined, you may be eligible to refinance under Home Affordable Refinance Program (HARP).

YOU MAY BE ELIGIBLE IF:
  1. The mortgage MUST be owned or guaranteed by Fannie Mae or Freddie Mac
  2. The mortgage MUST have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  3. The mortgage CANNOT have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  4. The borrower MUST be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.
  5. You have a reasonable ability to pay the new mortgage payments.
  6. The refinance improves the long term affordability or stability of your loan.

USDA Mortgages

Are you buying a property in a rural area? Then a loan from United States Department of Agriculture could be a great option. USDA mortgages provide low-cost insured home mortgage loans. Advantages of a USDA loan are similar to VA loans. Contact us to help determine if you and the home you are buying is eligible for USDA financing.

WHAT SHOULD I KNOW ABOUT THE ST. LOUIS USDA HOME LOAN?

The most appealing part of the USDA home loan for a buyer is the 100% financing. There is no need to come up with funds for a down payment, so long as the amount of the loan does not exceed the appraised value of the house. You may also be able to roll other fees into the mortgage.

This is a program specifically meant for people with low incomes. Traditional credit scores may not count against you. What USDA home loan is looking for are homeowners with no more than a 41% debt ratio, and they have even been known to make exceptions to that rule under extenuating circumstances.

This is a fixed rate mortgage so your rates will not suddenly skyrocket in 5 years. The interest rate set is where it will stand for the entire life of the loan. Any changes in the housing market and interest rates will have no affect on your monthly payments.

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