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I can't afford 20% to put down on a house?
Assuming you can qualify for higher monthly mortgage payments and have
an excellent credit history, you should be able to find a low
(3% or more) down payment loan. However, you may have to pay a higher interest
rate and loan fees (points) than someone making a larger down payment.
Do you offer Custom Loan programs?
Yes, the different types of loan programs being offered are changing
every day. Use our Loan Advisor so that we can get some basic information to help determine
what loan type will best fit your needs. top
Can I use some of my IRA or 401(k) plan for a down payment?
Under the 1997 Taxpayer Relief Act, first-time home buyers can withdraw
up to $10,000 penalty free from an individual retirement account
(IRA) for a down payment to purchase a principal residence. This
$10,000 is a lifetime limit. The law defines a first-time homeowner as
someone who hasn't owned a house for the past two years. If a couple is
buying a home, both must be first-time homeowners. Ask your tax accountant
for more information, or check IRS rules at http://www.irs.gov. Another
source of down payment money is a loan against your 401(k) plan.
Ask your employer or plan administrator if your plan allows for loans.
If it does, the maximum loan amount under the law is the one-half
of your interest in the plan or $50,000, whichever is less. Other conditions,
including the maximum term, the minimum loan amount, the interest rate
and applicable loan fees, are set by your employer. Any loan must be repaid
in a "reasonable
amount of time," although the Tax Code doesn't define reasonable.
Be sure to find out what happens if you leave your job before fully
repaying a loan from your 401(k) plan. If a loan becomes due immediately
upon your departure, income tax penalties may apply to the outstanding
What's the difference between a fixed and adjustable rate mortgage?
With a fixed rate mortgage, the interest rate and the amount you
pay each month remain the same
over the entire mortgage term, traditionally
15, 20 or 30 years. A number of
variations are available, including five- and
seven-year fixed rate loans with
balloon payments at the end. With an adjustable
rate mortgage (ARM), the interest
rate fluctuates according to the indexes.
Initial interest rates of ARMs
are typically offered at a discounted
interest rate lower than fixed
rate mortgage. Over time, when initial
discounts are filtered out, ARM rates will fluctuate
as general interest rates go up
and down. Different ARMs are tied to
different financial indexes, some of which fluctuate
up or down more quickly than others.
To avoid constant and drastic changes,
ARMs typically regulate (cap) how
much and how often the interest rate and/or
payments can change in a year and
over the life of the loan. A number of variations
are available for adjustable rate
mortgages, including hybrids that change from
a fixed to an adjustable rate after
a period of years.
Is a fixed or an adjustable rate mortgage better?
It depends. Because interest rates
and mortgage options change often, your choice of a fixed or
adjustable rate mortgage should depend on: the interest rates
and mortgage options available when you're buying a house your
view of the future (generally, high inflation will mean ARM rates
will go up and lower inflation that they will fall), and how
willing you are to take a risk. When mortgage rates are low,
a fixed rate mortgage is the best bet for most buyers. Over the
next five, ten or thirty years, interest rates are more apt to
go up than further down. Even if rates could go a little lower
in the short run, an ARM's teaser rate will adjust up soon and
you won't gain much. In the long run, ARMs are likely to go up,
meaning most buyers will be best off to lock in a favorable fixed
rate now and not take the risk of much higher rates later. Keep
in mind that lenders not only lend money to purchase homes; they
also lend money to refinance homes. If you take out a loan now,
and several years from now interest rates have dropped, refinancing
will probably make sense.
What is private mortgage insurance (PMI)?
Private mortgage insurance (PMI) policies are designed to reimburse
a mortgage lender up to a certain amount if you default on your loan.
Most lenders require PMI on loans where the borrower makes a down
payment of less than 20%. Premiums are usually paid monthly or can
be financed. With the exception of some government and older loans,
you may be able to drop the mortgage insurance once your equity in
the house reaches 22% and you've made timely mortgage payments. The
Servicing Lender will have the requirements for canceling the mortgage