Whether you're buying your first home or you want to access your equity in retirement with a reverse mortgage, Primacy Mortgage offers a loan program to fit your needs. We help buyers and homeowners choose the right type of mortgage for their needs with competitive rates on fixed-rate and adjustable-rate loans, conforming and jumbo mortgages, government and conventional loans, and traditional and reverse mortgages.
Fixed-rate mortgages are the most common type of home loan. As the name implies, these loans have a fixed interest rate that remains the same for the life of the loan. The 30-year fixed-rate mortgage is the standard home loan across the country, although the 15-year fixed loan is also popular. The shorter the term, the higher your mortgage payment but the faster you will build equity and the more you will save on interest. A 15-year loan also tends to have a lower interest rate than a 30-year loan for even greater savings.
A fixed-rate mortgage has a higher interest rate to start than an adjustable-rate mortgage, but it offers predictable mortgage payments that stay the same for the entire term of the loan.
Adjustable-Rate Mortgages (ARMs)
An adjustable-rate mortgage (ARM) is not as straightforward as a fixed-rate loan. ARMs have monthly payments that can go up or down as interest rates change. In most cases, an ARM has a fixed-rate period in the beginning during which the interest rate will not change. This is followed by a much longer period during which the interest rate will change (up or down) at preset intervals.
An adjustable-rate mortgage usually begins with an interest rate lower than a comparable fixed-rate loan. While the interest rate can go down after the fixed-rate period is over, keep in mind that while interest rates are still near historic lows, there's a good chance that rates will go up. Interest rates are also unpredictable, especially in the long run. This means you cannot predict your mortgage payment into the future.
ARMs can still be an excellent option, especially if you are not planning to stay in your home for more than 5 or 10 years and want to take advantage of the lowest possible rates or you expect your income to increase.
There are many types of ARMs but the most popular is the 5/1 ARM which has a fixed-rate period of 5 years with an interest rate that changes every year afterward. Other popular ARMs include the 3/1 ARM, 7/1 ARM, and 10/1 ARM.
A jumbo home loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac. In most parts of the country, the limit for a conventional mortgage is $424,100, up from $417,000; anything higher is a jumbo mortgage. In high-cost areas, the new limit is $636,150 (or 150% of the jumbo limit).
A jumbo mortgage is a good option if you want a loan amount higher than the conforming limit in your area to avoid taking out two mortgages. While jumbo mortgages require higher income standards and sometimes a higher credit score, jumbo mortgages come with additional flexibility. Many lenders allow a higher debt-to-income ratio as well as flexible income calculations and no mortgage insurance even when you put down less than 20%.
A conventional mortgage is a loan that is not insured or guaranteed by a government agency like the VA or FHA. If you have good to excellent credit, a conventional loan will likely offer a better interest rate than a government-backed mortgage. Conventional mortgages are sometimes held by lenders on their books in which case the lender can set its own guidelines and offer features not available with other mortgage programs.
An FHA loan is a government-insured loan popular among first-time buyers. With an FHA mortgage, you can buy a home with as little as 3.5% down and easier credit requirements and other qualifications compared to conventional loans. You can even use gifted money for your down payment.
The major drawback with an FHA loan is the cost. An FHA loan comes with two types of insurance premiums: an upfront mortgage insurance premium (MIP) around 1.75% and an annual MIP paid monthly that's usually around 0.85% of the loan amount. Even if you reach 20% equity in your home, the MIP will need to be paid for the life of the loan, unlike a conventional mortgage and private mortgage insurance (PMI).
VA loans are perhaps the best mortgage program available if you qualify. Only active-duty servicemembers, veterans, and eligible surviving spouses can qualify for a VA loan, but the program offers numerous benefits:
-- No down payment necessary compared with 3.5% with an FHA loan or 5% with a conventional loan
-- No monthly mortgage insurance premium
-- Low funding fee
-- Limits on closing costs
-- Lower average interest rates than other options
A reverse mortgage is a unique loan option available to homeowners who are aged 62 or older. With a reverse mortgage, you can convert some of the equity in your home into cash. This loan is designed to give retired homeowners a means of accessing their accumulated wealth to cover living expenses, medical expenses, or anything else.
Unlike a traditional mortgage, a reverse mortgage has no payments. As a borrower, you do not pay back the loan until the house is sold or otherwise vacated. As long as the borrower lives in the home, no payments toward the balance are required. A key requirement, however, is to maintain property taxes, homeowners insurance, and HOA dues to keep the loan from becoming due.
Another unique component of a reverse mortgage is the payment options. With a reverse mortgage, you can receive the loan proceeds in one of several ways:
-- Line of credit to use the funds as needed
-- Fixed monthly payments for a specific amount of time
-- Fixed monthly payments for as long as you live in the home
-- A line of credit in addition to fixed monthly payments for a specific amount of time
-- A line of credit in addition to fixed monthly payments for as long as you live in the home
-- One-time lump sum
-- Use a reverse mortgage to downsize and purchase a new house (HECM for Purchase)
No matter what type of mortgage you think may be right for you, Primacy Mortgage can help. Contact us to speak with a loan officer who can help you explore and compare options and find the loan program perfect for you.