06
Jan
By First Rate Financial Group
Mortgage

Understanding The Differences Between Conforming Loans And Jumbo Loans

Understanding The Differences Between Conforming Loans And Jumbo LoansPotential homeowners need to understand the different types of loans available. This is a major financial decision, and it is important to evaluate the benefits and drawbacks of each option. The majority of home loans fall into two categories. The first is called a conforming loan and the second is called a jumbo loan. There are a few significant differences between them.

How Is The Size Of A Home Loan Determined?

First, it is important to understand how the size of a home loan is determined. Homebuyers usually need to put money down before they will be granted a home loan. First-time homeowners may be able to qualify for a home loan with only 3.5 percent down, but most people will be asked to put 20 percent down. Otherwise, they could be asked to purchase private mortgage insurance. The remaining balance of the sale is the size of the loan financed by the lender. 

What Is A Conforming Loan?

A conforming loan is any loan that is beneath the federally set limit. Typically, a conforming loan comes with a lower interest rate than a jumbo loan. Therefore, home buyers who have a proposed loan amount at or near the federal limit, or those who have flexibility in the size of the down payment, are better off securing a conforming loan so they can save money. 

What Is A Jumbo Loan?

A jumbo loan is any loan that is above the federally set limit. While a jumbo loan can still allow homeowners to secure a house, it usually comes with higher interest rates. Before taking out a jumbo loan, potential homebuyers need to talk to the loan officer about their other options. There might be ways to avoid taking out a jumbo loan. 

Work With A Professional Loan Officer

Anyone interested in taking out a home loan has to work with a professional loan officer who can explain the different options available. In addition to deciding on a fixed-rate versus an adjustable-rate mortgage, applicants need to figure out if they qualify for a conforming loan or a jumbo loan. The differences between these two loans can equate to thousands of dollars over the life of the loan. 

 

04
Jan
By First Rate Financial Group
Mortgage

An Overview Of Mortgage Points

An Overview Of Mortgage PointsThere is a lot of terminologies involved in the mortgage application process, and one common term people come across is a mortgage point. What exactly is a mortgage point, and how might impact the price of the loan?

What Is A Point?

Points represent fees due at signing. Some lenders charge points while others do not. In some cases, applicants are given the option to pay points in exchange for a rate reduction. A single point is the equivalent of one percent of the loan’s value. If the home loan is $200,000, then a single point is $2,000.

Origination Points And Discount Points

There are two common types of mortgage points. The first is called an origination point. The second is called a discount point. An origination point is charged to cover the cost of creating the loan. Typically, origination points are directly tied to the compensation the loan officer receives for writing the loan. The other type of point, the discount point, is used to reduce the interest rate of the loan itself. While each lender has its own standards, one discount point paid usually translates to an interest rate reduction of 0.25 percent for a fixed-rate loan or 0.375 percent for an adjustable-rate loan.

Is One Point Better Than Another?

Applicants might save money on taxes if they pay discount points instead of origination points. Discount points could be claimed as a tax deduction on Schedule A, but it is important for any homeowner looking to save money on taxes to speak to a tax professional for clarification. Sadly, origination points are not deductible. Most lenders give homeowners options regarding discount points, so homeowners need to think carefully about whether it is in their best interests to claim discount points.

Should Homeowners Take Discount Point Offers?

Some homeowners might wonder whether it is better to keep the cash and pay no points or take discount points to buy down the rate. This is a personal decision, and homeowners need to think about the best way to use their money. It might be better for some homeowners to pay discount points in exchange for a lower interest rate. It could be better for other homeowners to keep their cash and use it pay off other loans.

15
Dec
By First Rate Financial Group
Mortgage

How Long To Save Mortgage Documents

How Long To Save Mortgage DocumentsPurchasing a house involves a tremendous amount of paperwork. There is even more paperwork involved if the buyer goes through a lender. With so much paperwork, some homeowners might be wondering how long they have to keep all of these documents. Ideally, homeowners should keep these documents for the life of the loan, but there are a few other points to consider. 

What Documents Come With The Home?

Even though the exact documents that come with the home can vary depending on the type of purchase, there are a few common pieces of paper. The deed is one of the most important documents that come with the house. It indicates that the homeowner actually owns the home. The promissory note is also important. This is the mortgage contract, and it states that the homeowner agrees to repay the debt with the interest agreed upon. A purchase agreement is signed by the buyer and seller. It includes the price of the house, the closing date, and other details. Title insurance is also important because it protects the homeowner from issues with the title to the house. 

Which Documents Must Be Saved?

Ideally, all of these documents should be saved; however, the deed to the house is the most important thing. It is critical because it signifies the homeowner owns his or her house. It is also a smart idea to keep the inspection report or the closing disclosure, as this highlights any potential issues with the home. The homeowner may need to go back to those documents later to see what issues might need to be addressed. 

Why Keep These Documents?

Homeowners need to save these documents because they can be helpful if issues arise with the house. For example, these documents might be necessary for tax season, as there are a lot of deductions that could stem from the purchase of a house. It is important to work with a tax professional on these issues. Furthermore, these documents are helpful if a legal or insurance question arises. Homeowners might need these documents to address any concerns. These documents can also be helpful when homeowners decide to sell the house down the road. It is prudent to store these documents in a safe or a safety deposit box at the bank.