Mortgage Options
Conventional
Conforming
Fixed
A fixed interest rate is an interest rate on a liability, such as a loan or mortgage, that remains fixed either for the entire term of the loan or for part of this term (10, 15, 20, or 30 years)
ARM
An ARM is an Adjustable Rate Mortgage. Unlike fixed rate mortgages that have an interest rate that remains the same for the life of the loan, the interest rate on an ARM will change periodically. The initial interest rate of an ARM is lower than that of a fixed rate mortgage, consequently, an ARM may be a good option to consider if you plan to own your home for only a few years; you expect an increase in future earnings; or, the prevailing interest rate for a fixed rate mortgage is too high.
An ARM has four components: (1) an index, (2) a margin, (3) an interest rate cap structure, and (4) an initial interest rate period. When the initial interest rate period has expired, the new interest rate is calculated by adding a margin to the index. Your lender will disclose the margin at time of loan application (margins may vary from lender to lender, so it’s a good idea to shop around for a low margin). As the index figure moves up or down, your interest rate will be adjusted accordingly. Acceptable index options on FHA insured ARM loan transactions are 1) the Constant Maturity Treasury (CMT) index (weekly average yield of U.S. Treasury securities, adjusted to a constant maturity of one year); or 2) the 1-year London Interbank Offered Rate (LIBOR). Increases or decreases in the interest rate will be limited by the interest rate cap structure of your loan.
The interest rate cap structure provides some protection from large interest rate swings. There are two types of caps: (1) annual, and (2) life-of-the-loan. The annual cap restricts the amount your interest rate can change, up or down, in any given year
Low Down Payment Conventional Programs
1) Conventional 1% Down Payment
Give your borrowers a low down payment, a great rate and a head start on their equity.
Program highlights include:
- Clients pay 1%, Lender gifts 2%, giving borrowers 3% down payment
2) Home Possible Advantage
Freddie Mac’s great alternative to FHA financing for borrowers looking to purchase with a low or NO down payment!
- Up to 97% LTV, with 3% down payment – However, Gift funds eligible for entire down payment
- First time homebuyers, move-up borrowers, and retirees
- No income limits for Underserved Areas
- No reserve requirements for 1-unit properties
3) HomeReady
Fannie Mae’s conventional option for borrowers looking to purchase with a low or NO down payment
Purchases up to 97% including FTHB
- Up to 97% LTV, with 3% down payment – However, Gift funds eligible for entire down payment
- Reduced Mortgage Insurance
- High Balance available
- Relaxed AMI income limits based on census tracts
Government Loan Programs
MSDHA
The MI First Home loan program is a mortgage product that is available to first-time homebuyers state-wide and repeat homebuyers in targeted areas.
Program Description:
- 1% Down payment
- Down Payment Assistance up to $7,500. (Homebuyer Education class required.)
- Available to first-time homebuyers (have not owned a home in the previous three years) statewide and repeat homebuyers in targeted areas.
- Household income limits apply and can vary depending on family size and property location. Income Limits – Expanded Version
- Sales Price limit – $224,500 statewide.
- Minimum credit score of 640 required or 660 for multiple-section manufactured homes.
FHA
Your down payment can be as low as 3.5% of the purchase price. Low down payments; Low closing costs; Easy credit qualifying
USDA
Known as Section 502 Direct Loan Program – this rural development loan is a great option for borrowers looking for 100% financing.
- No down payment required,
- 30-year fixed rate,
- No cash reserves needed,
- Closing costs may be financed on some transactions,
- Seller contributions allowed
VA
A VA loan is a mortgage loan that’s backed by the Department of Veterans Affairs (VA) for those who have served or are presently serving in the U.S. military; or their surviving spouses (provided they do not remarry).
- No down payment required (unless required by the lender or the purchase price is more than the reasonable value of the property).
- Negotiable and competitive interest rate.
- Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5 percent and exemption for veterans receiving VA compensation).
- VA rules limit the amount you can be charged for closing costs.
- Closing costs may be paid by the seller.
- No private mortgage insurance premiums are required.
- An assumable mortgage.
Energy Efficient Mortgage Program
Under its EEM program, FHA Insures a borrower’s mortgage used to purchase or refinance a principal residence, and the cost of energy efficient improvements to be made to the home. The borrower need only qualify for the loan amount used to purchase or refinance a home. The borrower is not required to be qualified on the total loan amount with the portion of loan used to finance energy efficient improvements.
Rehab Loans
FHA 203(K)
Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home. The cost of the rehabilitation must be at least $5,000
HUD Title 1
Title I Home and Property Improvement Loans on single family homes may be used for alterations, repairs and for site improvements. Loans on multifamily structures may be used only for building alteration and repairs.
Maximum Loan Amount:
- Single family house – $25,000
- Manufactured house on permanent foundation (classified and taxed as real estate) – $25,090
- Manufactured house (classified as personal property) – $7,500
- Multifamily structure – an average of $12,000 per living unit, up to a total of $60,000
Maximum Loan Term:
- Single family house – 20 years
- Manufactured house on permanent foundation – 15 years
- Manufactured house (classified as personal property) – 12 years
- Multifamily structure – 20 years
Property Improvement Program (PIP)
Home improvement loans for homeowners and rental property owners. Loan terms up to 20 years keeps monthly payments affordable; No appraisal required; No lien requirement on loans under $7,500 for Homeowners – loans up to $25,000
Interest rates for homeowners vary based upon the gross household income:
- Gross Household Income $19,999 or less – 4% – APR 4.5653%
- Gross Household Income $20,000 to $39,999 – 6% – APR 6.6123%
- Gross Household Income $40,000 to $105,700 – 8% – APR 8.6610%
The annual percentage rate (APR) quoted above represents a typical $10,000 FHA-insured fixed rate loan with a 20-year term. This APR is based on a 2% origination fee, $200 application fee and $100 inspection fee. Please note that the APR may vary depending upon the Mortgage Loan Fees the participating lender charges the borrower.
Private Financing
Land Contract
A ‘land contract‘ (sometimes known as a “contract for deed,” “agreement for deed,” “land installment contract” or an “installment sale agreement”) is a contract between a seller and buyer of real property in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price
Private (Hard) Money
A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans because of the higher risk and shorter duration of the loan. Most hard money loans are used for projects lasting from a few months to a few years
Important Phone Numbers
It is the Sellers/Purchasers responsibility to have the utilities transferred out of and into their names effective
At Closing
AT&T: 800-288-2020
Bright House 734-452-9035
Comcast Cable/Internet: 734-459-7300
Consumers Energy: 800-477-5050
Detroit Edison DTE: 800-477-4747
WOW Cable/Internet: 866-496-9669
United States Postal Services 800-ASK-USPS www.moversguide.usps.com
Order Final Water Read: **SELLERS RESPONSIBILITY** (Seller must order final water bill and have the final water bill sent to title company and the remaining balance will be mailed back to the seller)