In many cases there can be errors on your report, ordering it ahead of time allows for time to make the needed corrections before shopping for a loan. Remember that the credit bureaus usually require 30 days to respond to a request for a correction. If it is evident that the error is the fault of credit bureau there are ways to have them expedite the correction.
There are also a variety of loans that can impact the monthly payment depending on:
Quick List Of Mortgage Options |
Conventional |
These loans are not insured or guaranteed by the government, as opposed to FHA or VA loans. With less than a 20% down payment the lender will most likely require mortgage insurance. |
| Conventional Conforming |
A conforming loan is one that conforms or adheres to strict Fannie Mae/Freddie Mac loan underwriting guidelines. Conforming loans are a low risk to the lender, so they offer the lowest interest rates. Documentation and fair-to-good credit are necessary. The ratios for conventional home loans, PITI expense cannot usually exceed 26-28% of your gross monthly income, and total expense should be no more than 33-36. You must have the requisite down payment which is generally 20% of the purchase price, they will also require proof of where it came from and a few months of cash reserves in the bank. |
| Conventional Non-conforming |
Non-conforming loans have no set guidelines and vary widely from lender to lender. In fact, lenders often change their own non-conforming guidelines from month to month. Generally, they are more liberal in the debt ratios, and require that not more than about one-half of a home owners income goes to housing and that not more than about two-thirds of its income (60%) on total indebtedness (housing and other debts). Lenders feel that if they follow these guidelines, homeowners will be able to pay off their mortgages fairly comfortably and lenders will not have to worry about loan defaults and foreclosures. Closing costs can come from many different sources; seller carry-back, gift letter, equity. |
| FHA Mortgages |
The program is under the jurisdiction of the HUD and requires that you qualify in terms of income and credit. An FHA loan allows you to buy a house with as little as 3% down, instead of the higher percentages required to secure many conventional loans. The FHA does not make home loans, but does insure them in the case of default by the buyer. You need to shop rates when looking for a FHA mortgage just as you would with a conventional loan because the rates are established by the lender, not the government. For an FHA loan you' will need to have a good credit history and sufficient income to qualify for the loan. Your monthly housing costs include mortgage principal, interest, property taxes, and insurance should not exceed 29% of your gross monthly income . |
| VA Mortgages |
Loans only available to qualifying veterans or service personnel. The benefits include; zero down payment and no monthly mortgage insurance. The VA allows loans up to $359,650. The VA has recently released a hybrid ARM product. Veterans now have a choice of a fixed rate or an Adjustable rate VA mortgage. There is a funding fee and it varies between 0 and 3.3 percent of the amount of the loan depending on your current Veteran Status. It is generally added into the total loan amount, so you are not required to pay this out of pocket. |
| Fixed-Rate Loans |
A fixed-rate loan has an interest rate that stays the same for the lifetime of the loan. Your loan payments stay the same and never change. Fixed-rate loans offer stability in fluctuating market conditions and the comfort of knowing exactly how much your housing payment will be. Fixed Rate mortgages generally cost more during the first years of a mortgage than Adjustable Rate mortgages |
| Adjustable-Rate Loans |
Adjustable-Rate Mortgages (ARMs) are home loans with interest rates that change periodically. They frequently have an initial interest rate lower than that of a fixed-rate.. After that initial period, the interest rate may be adjusted periodically to reflect changing market interest rates. Your payment may go up or down with interest rate changes, your future monthly payments may be uncertain. ARMs carry risks in periods of rising interest rates, but can be less costly over the long run if interest rates go down. |
| Interest-Only Loans |
The mortgage payments only cover the interest that accumulates on the loan balance. The loan balance does not decrease with the payments. Usually the interest-only payments last for a limited period, after which payments rise and the borrower begins paying principal in addition to interest. |
| Jumbo Mortgage |
Jumbo Mortgage is a mortgage with a loan amount above conventional loan limits . The single-family limit change annually, the current limit is $417,000 . If you need to borrow more than that, you will need a jumbo mortgage. The average interest rates are typically greater than normal for conforming mortgages. The funding is generally from other large investors, such as insurance companies and banks, which step in to fill the need with maximum mortgage amounts going to the $1 million or $2 million range. |
| Negative -Amortization Loans |
Is a deferred interest loan that allows the borrower to make monthly payments that are less than the accruing interest. If the borrower chooses to make the minimum monthly payment, the loan balance will increase by the amount of interest not paid on the loan. |
| Balloon Mortgages |
A balloon mortgage gives you a fixed number of payments, but doesn't fully pay off your loan. At the end of the payments, which is specified when you take out the loan (1,3, 5, 10 years) the final payment is due in lump sum. If you know that you are going to sell your home in ten years, a ten-year balloon is a good way to have lower house payments. You can make small payments on your mortgage for those ten years then pay off your loan when you sell the home in ten years. The other option is to refinance the house at that time. |
| Convertible Adjustable Rate Mortgages |
CARMS allow you to convert an ARM, an adjustable rate mortgage, to a fixed mortgage. CARMS can be great if interest rates are high now, but will probably be lower later. You can adjust to a fixed mortgage when the rates drop. That's the theory, but there's an element of gambling here. Today these are very rare. |
| Growing Equity Mortgages |
GEM'S feature a gradually increasing payment, but all the payment increase goes to reduce your loan principal . GEMS allow you to pay mortgages off earlier, save tens of thousands in interest payments, and build equity quickly. For instance, a 30-year GEM mortgage, depending on the interest rate, can usually be paid off in 18 years! These types of loans are extremely rare. |
| No Down Payment |
0% Down payment required and closing costs paid by the borrower (seller can contribute up to 6% towards closing costs). |
| Assumable Mortgage |
Assumable mortgages are relatively rare. A homeowner with an assumable loan can "hand off" the loan to a buyer instead of paying it off using proceeds from the home sale. If rates are low and you can get one, by all means do so. If rates rise, buyers will want to assume your loan (and might be willing to pay more for your house) because it'll be much cheaper than any loan they could get from a bank or other source. |
