Adjustable Rate Mortgages
The lowest rates will typically be available with an Adjustable Rate Mortgage (ARM). With initial periods of 5, 7, and 10 years, conforming conventional ARMs are a great option if you have a good sense of your future. For example, why choose a higher 30-year fixed rate loan when you know you are going to retire, sell the house and move to the beach in 6 years? Rate caps offer some built in protection and predictability, but future rate adjustments should be carefully considered.
Fixed Rate Mortgages
Fixed rate mortgages give you predictability, with safe regular payments. The gold standard is certainly the 30-year fixed rate conforming conventional mortgage and I am a big fan of this loan. It is safe, and enables you to settle in for a consistent payment over the long haul. The 15-year fixed rate conforming conventional mortgage will pay off your home twice as fast and so can be a great wealth building tool. However, the monthly payment is about 40% higher than the 30-year fixed rate, making this a good choice for some – but not all borrowers.
Any Term Fixed Rate Mortgages
Standard loan terms for fixed rate mortgages are 10, 15, 20, 25, and 30 years, but we have a special program enabling you to choose any term from 8 years to 30 years. This option can be attractive to people refinancing who don’t want to start a brand new 30-year term.
The conventional conforming loan limit, as of January 2018, is $453,100 in our area. Need a loan larger than that? Jumbo fixed or adjustable rate mortgages are available with non-conforming loan sizes up to $2,000,000+, but with stricter underwriting than with a conforming conventional loan.
FHA loans make qualifying easier, with flexible credit guidelines and down payments as low as 3.5%, making them a fine choice for many first-time homebuyers. Maximum loan size in North Carolina varies based on county.
Fixed Rate Mortgages with Private Mortgage Insurance
First-time home buyers with excellent credit may find that a conventional loan with private mortgage insurance – and with a down payment of 3%, 5%, 10% or 15% – can be a better choice than an FHA loan. Excellent credit earns you a low cost of mortgage insurance, potentially making this an ideal choice for borrowers great credit and a smaller than 20% down payment.
VA Home Loans
If you are a veteran or an active-duty service member with a loan benefit, the VA loan is hard to beat with excellent rates, less restrictive credit guidelines and low-down-payment & zero-down-payment options. If you have this benefit available, this is the loan we should look at first!
Available in eligible rural and suburban areas, USDA loans offer low rates and have zero down payment requirements. If available in your area, these are worth considering if your family meets the guidelines.
Interest-only mortgages have built in risk – in general, you pay only monthly interest for the 1st 10 years, and so when repayment begins at the start of year 11, your loan morphs into a 20-year term principal & interest loan – with a huge payment spike. Interest-Only ARMS are especially risky because you have the future payment spike, but also the future unpredictable interest rate hikes which will further impact the payment. These loans are only right for some extremely well qualified borrowers, and the risk should be carefully considered.