Mortgage and Financing Options
First Time Home Buyer Programs
These programs usually offer lower interest rates than most other types of mortgages and therefore equate to less money out of pocket. For example, purchasers may use the Delaware State Housing Authority (DSHA) Bond Issue in conjunction with a Second Mortgage Assistance Loan (SMAL) or a grant. There are set income limits for these kinds of programs as well as purchase price limits. For the DSHA money, a first time home buyer is considered someone who has not owned a home in the last three years. Call us to see which program may be best suited to your needs.
Not only can a veteran finance up to 100% of the purchase price of their new home, this type of loan also allows the seller to pay all of the veteran’s closing costs. While there are loan size limits with VA, there are no income limits. Most people think that you can only use your VA entitlement once. This is incorrect; your VA entitlement can be used over and over again. You will pay a higher funding fee with each subsequent purchase, but it is still available. Also, you can assume another veteran's mortgage even if you are not a veteran. (Note: The veteran cannot use his entitlement again until the mortgage is paid off.) Contact any member of our team for more details.
The Federal Housing Administration (FHA) makes loans up to 97% of a home’s value. Current loan limits for a single-family dwelling is now $271,050 in Kent County, $379,500 in New Castle County and $316,250 in Sussex County As of January 2009). Down payment is usually 3%. There are no income limits with FHA, it can be used over and over, debt to income ratios are much more generous than VA, conventional or first time financing and credit does not have to be perfect. Many people choose FHA financing if they are short on cash or need the ratios to qualify. Call Dee and Doreen’s Team to find out more.
If you as a borrower, or the home you are buying, does not fit into any of the above categories, this is probably the mortgage for you. Down payment requirements are usually 10-20% depending on credit scores. Debt to income ratios are usually 28%-36%. Most lenders provide conventional financing.
Adjustable Rate Mortgage (ARMs)
This is usually a conventional loan product with an interest rate that adjusts periodically, based on changing market rates. Most ARMs have an initial period during which the interest rate remains the same. Once this period ends, the ARM has a specified adjustment period at the end of which the interest rate may be adjusted up or down, depending on market conditions. Most are adjusted for the life of the loan, but some lenders offer Convertible ARMs that may be converted to a fixed rate mortgage. Call us for clarification on Adjustable Rate Mortgages.
This type of mortgage amortizes the loan balance over a 30 year period, but the remaining balance is actually due, in full, after a much shorter term. Balloons usually offer a lower interest rate and may be suitable for you if you relocate frequently or plan to sell the property before the balloon is due.
In this type of loan, interest is pre-paid to reduce monthly payments. Example of a temporary buy down: current interest rate is 7%, but in order to qualify, you need to buy the rate down to 5%. Your payments for the first year are based on 5%, the second year they are at 6% and years 3 through 30; they are based on a 7% interest rate. This is a great option if you need to qualify at the lower rate but know that your income situation will change for the better over the next three years, or if you don’t plan to keep the house for more than three or four years.