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Home Loans for Purchase or Refinance

Fixed mortgage: Simple interest, fully amortized home loans have payments that remain the same for the full term. 30 year and 15 year fixed rate mortgages are the most common. Short term home loans accelerate principal reduction and cut interest expense, while a 30 year mortgage can provide lower payments. Some lenders offer mor term options, such as 20 year or 10 year fixed rate loans. Other loan options can include low cost or zero points mortgage programs.

Adjustable mortgage: The most common adjustable rate loan is a fully amortized 30 year mortgage. Home loan rates are determined by adding an index to a margin. The index is a financial point of reference, such as the one year treasury, which can fluctuate. The margin is set by the lender, and remains the same for the life of the loan. Lenders offer ARMs with current mortgage rates fixed for the initial 3, 5, or 7 years, with the remaining term adjusting on a yearly basis. These programs typically have a low cost or zero point home loan option. 

FHA mortgage: Popular for buying a home because of the low down payment, plus the credit and income guidelines offer easy qualifying compared to conventional loans, FHA loans offer:

  • Down payment as low as 3.5% of purchase price when buying a home
  • FHA guidelines allow lower credit scores for more easy qualifying
  • Higher debt ratios allow home buyers to qualify with less income
  • A non-occupant co-borrower can help a first time home buyer qualify
  • Low cost fees with limitations set by FHA & zero points option
  • A previous bankruptcy only needs to be discharged for two years
  • Less cash reserves make it easier to qualify for a first time home buyer
  • FHA allows all or part of the down payment to be a gift from close relatives

When buying a home, remember to budget enough money for closing costs and setting up an impound account, which is money collected at closing held in reserve for taxes and insurance.

FHA Loans for Home Purchase & Refinance

FHA programs can work well for borrowers who need flexible qualifying guidelines. Mortgage lender rate quotes are available to buy a home or refinance with FHA. Zero point option, rate & term, cash out refinancing programs are available, as well as bad credit FHA programs.

If you have an existing mortgage through FHA, you have the opportunity to reduce the monthly loan payment using a streamline FHA refinance, which requires no income verification.

Benefits of the FHA Program:

  • Cash out FHA refinance up to 85% loan to value
  • Minimum down payment for buying a home is 3.5%
  • Higher loan limits are based on location of the property
  • FHA lenders allow for credit scores as low as 620
  • A higher debt ratio is allowed in comparison to conventional loans
  • FHA rate quotes are comparable to conventional home loans
  • Non-occupant co-borrower may be added to help qualify
  • Certain closing costs have limitations which are set by FHA
  • A previous bankruptcy only needs to be discharged for 2 years
  • Collection accounts may not have to paid to close a loan
  • FHA may not have a requirement for any cash reserves

Compare FHA refinance or home purchase quotes for 15 year or 30 year fixed rates, and 5 year ARM program. Every loan is required to have a mortgage insurance premium of 1.75%, which can be added to the financed loan amount. There is also a monthly premium added to the payment. Condominiums do not require the up-front premium, only the monthly amount. For information on non-approved condos, see spot loans.

FHA program guidelines allow a debt ratio of 43% of gross income for the PITI monthly payment, plus all other monthly debts. For an FHA refinance or home purchase, Good compensating factors may allow for a higher ratio, such as: Documented ability to pay more than the proposed loan payment; demonstrated ability to accumulate savings; minimal increase in housing expense; potential for increased earnings; substantial non-taxable income; good credit history.

Home Equity Loan Financing Programs

Home equity loan programs work essentially the same as a second mortgage. Equity cash out can be accessed without having to refinance the existing first mortgage, and the cash can be used for debt consolidation, auto loans, home improvement, or personal expenses.

The amount of a loan or a credit line is determined by the difference between the appraised value and the current first mortgage, subject to the maximum loan to value allowed by the lender. Closing costs and fees vary by lender, with some offering zero point home equity loans.

With a fixed rate equity loan, the borrower receives a one-time payment at the closing of the process. If you have an existing home equity loan, 2nd mortgage, or a home equity credit line, it has to be paid off with the proceeds of the new loan, so be sure to borrow a sufficient amount.

If a home equity loan is secured by a lien on your primary residence, the interest payments may be deductible from your taxes, within the allowed limitations, check with a tax advisor. After the loan documents are signed, you have a 3 day right to cancel if you change your mind.

Equity loans are typically available in 5 year, 10 year, 15 year or 20 year terms. Home equity loans with longer terms can provide a lower payment, but also means more interest is paid over the life of the loan.

For example, the monthly payment on $100,000 for 30 years may be about $200 less than a 15 year loan, however, the interest paid could be more than double for the full 30 year term.

Home Equity Line of Credit

Would you like money available in case of emergencies?  Need to send your kid to college?  Thinking of improving your home?  A Home Equity Line of Credit (HELOC) from Somerset Investors Corp. may be just what you’re looking for.  A HELOC works a lot like a credit card with a much lower interest rate.  You will have money available, secured by the equity in your home, that you can draw on and use at any time.  Or, you can decide to withdraw the entire amount in one lump sum at closing.  Best of all, the interest is usually tax-deductible! 

New Home Financing

Somerset Investors Corp. can find you the perfect loan and start your home purchase off right. With hundreds of loan programs available, we’ll help you match your needs with a loan you’ll love for as long as you own your home. Somerset Investors Corp. can find you the perfect loan and start your home purchase off right. With hundreds of loan programs available, we’ll help you match your needs with a loan you’ll love for as long as you own your home.

Fixed Rate Loans

Several categories of conventional loans exist, the most common and familiar being the fixed rate mortgage. In the cases of fixed rate mortgages, the borrower will lock in an interest rate, and pay down both the principal and interest on the loan at that interest rate every month until the mortgage is paid off. The most typical term of a fixed rate loan is 30 years, though fixed rate mortgages can also be obtained for much shorter terms, the primary difference being in the size of the monthly mortgage payment.

Conforming Loans

Other conventional loans are known as conforming loans. In these cases, an arrangement is made between borrower and lender that comply with the stipulations of two federally run mortgage trading companies (or Government Sponsored Entities – GSEs) Fannie Mae (FNME) and or Freddie Mac (FHLMC).

Fannie Mae and Freddie Mac do not directly approve or deny loans. They buy and sell home mortgages, working with lenders to make home ownership easier for people to attain. Lenders like to sign up borrowers with conforming loan, because they can then sell these loans to Fannie May or Freddie Mac in order to more quickly receive the funds coming to them, and use those funds to make other investments. Fannie Mae and Freddie Mac, in turn, then repackage these loans to sell to investors as securities.

The current guidelines for a conventional Fannie Mae loan set a maximum purchase price for a single-family home at slightly above $415,000 (though residents of Alaska, Hawaii, or Guam may be able to qualify for an even larger loan).

The interest rate as well as the short- and long-term pricing on a conforming loan is determined primarily by the type of loan applied for. Also taken into consideration will be the amount of funds you already have to contribute to closing costs, your credit rating, credit score, and credit history, your employment history, and the type and location of the home in question.

Jumbo Loans

Other forms of conventional loans are nonconforming loan instruments that do not meet Fannie Mae or Freddie Mac loan qualifications, such as jumbo loans, or loans so large they fall outside the Fannie Mae and Freddie Mac loan limits (or purchase limits). Jumbo loans are provided by private investors and as such ordinarily come with much higher interest rates than conforming loans.

FHA Loans

Government entities from a local to a federal level and private entities alike have worked to develop loan programs that make home ownership a reality for many people considered under-qualified for traditional mortgages. These include loans for first-time homebuyers and people with a low-to-moderate income that are insured by the Department of Housing and Urban Development (HUD) via the Federal Housing Administration (FHA).

HUD and the FHA do not make loans directly, rather they insure loans, meaning that the lender still gets paid back even if you default on the home loan.

What Do I Need To Get Started?

Here’s a quick checklist of the information we’ll need from you in order to process your application for a home loan.

Here’s What You Need

In order to process your application for a home loan, we’ll need to gather some straightforward information from you regarding your finances.

To verify your income, we’ll need the following items as they apply to you:

  • Pay stubs for the past 30 days
  • W-2 forms for the last two years
  • If you are self-employed or commission-based, you’ll need to provide tax returns for last 2 years (all pages)
  • If you are obligated to pay or are relying on income from child support or alimony, or there is a division of property in a divorce settlement, then a signed Divorce Decree (all pages) will be required.
  • We’ll also ask for proof of funding/down payment, such as:
  • Bank, Investment and/or 401K Statements for past two months (all pages)
  • If your funding is contingent on sale of current home, you’ll need to provide a Settlement Statement (sold) or Contract (sale pending)
  • Some other information we will need:
  • Rental history including landlord contact information
  • Bankruptcy filing and discharge papers (all pages)
  • VA Loan: Certificate of Eligibility, copy of DD214
  • Signed Application (also known as a 1003)

Please note, some lenders may not require that you submit the above documentation as a condition to submitting your loan application and/or providing you with a Good Faith Estimate.