Tag: Lending

Word of the Week: Amoritzation

Defining Mortgage Amortization and Options

Simply put, amortization is a loan that is paid off with a fixed repayment schedule in regular installments over a period of time. Payments may be Fully or Partially Amortized.jsrealty4u amortization

Full Amortization

Full amortization is an organized method of repaying a loan by making regular, equal payments. With this method, the loan – or principal – and all of the interest on the loan, is reduced to zero by the loan’s maturity. Traditionally, the payments are made on a monthly basis. And while each payment remains the same, the amount of interest and principal paid each month fluctuates.jsrealty4u loan mortgage amortization

Partial Amortization

jsrealty4u mortgage loans amortization balloonPartially amortized loans are a series of amortized payments followed by a “balloon payment” (or lump sum) at the loan’s maturity. The balloon payment is the entire remaining balance. A partially amortized mortgage provides much lower monthly repayments, however a massive final payment is due at the end of the contract. Under a partially amortized mortgage, the final payment is larger than any previous payment as it “balloons” on the last installment. This type of payment is often found in commercial lending arrangements. The lower monthly payments can be helpful while the commercial project grows and, the developer hopes, appreciates.

Full or Partial – Which is best for You?

JS Realty jsrealty4u loans amortizationNot sure which type of amortization is right for you? Contact our good friend and Lender, Keith Harris (NMLS ID #: 838973). Keith is committed to spending the necessary time to understanding his clients needs and will tailor a loan best suited for YOU. From mortgage rates to refinancing, Keith and his team at Intercoastal Mortgage can find the best solution for you and your family.

Mortgage Loan ABC’s

Understanding the most common types of mortgage loans available today

There are many choices when it comes to the types of mortgage loans you can apply for when buying a home. Each one comes with it’s own set of options, qualifications, and rules. But it’s important to understand the most common types of loans at their most basic level. Especially once your Lender starts talking about rates, points and qualifying ratios! So here are your options. It’s as simple as A, B, C, and F (hey, nothing is perfect).

So, what is a mortgage? By definition, a mortgage is a legal document that promises property to the lender as security for payment of a debt.jsrealty4u mortgage loan propertyA: Adjustable-Rate (ARM)
JS Realty variable mortgage ratesThis is a mortgage in which the interest rate floats up or down according to a specified index. The interest rate is “adjusted” at certain time intervals (such as six months or one year), usually having a “cap rate” or maximum rate of change per adjustment interval (such as 1%, or 4%). Terms such as “one year ARM” generally identify the adjustment interval (interest rate adjusted after one year).

B: Balloon
jsrealty4u mortgage loans balloonThis is a unique type of loan, as it is rather short. You make a monthly payment for 5 – 7 years, based on a term of 30 years. There’s often a low interest rate, and it can be easier to qualify for this versus a traditional 30-year-fixed. A balloon mortgage can be an excellent option for many home buyers. There is, however, a risk to consider. At the end of your 5-7 year loan term you will need to pay off the outstanding balance. This usually requires you to either refinance, sell your home, or convert the balloon mortgage to a traditional mortgage at the current interest rate.

C: Conventional
JS Realty Loan mortgageThese loans are neither insured nor guaranteed by the government. As such, conventional loans represent a greater risk to lenders than government backed loans. Conventional loans can start with as low as 5% down, but if you can put at least  a 20% down payment (80% LTV) you can avoid paying private mortgage insurance.

F: FHA
Federal Housing Administration loans are available to all types of borrowers, not just first-time buyers. You can read more about the differences between a conventional loan and an FHA loan in one of our previous blogs.

JS Realty Lock Interest Rate mortgageF: Fixed Rate
The most common type of home loan is the fixed-rate mortgage. The interest rate remains the same for the life of the loan, so the principal and interest remain the same, too. This is one of the best reasons to buy vs rent, as rents rise over time where as most mortgages stay constant for the life of the loan.

If you’re interested in learning more, or would like to apply for a loan, contact our preferred lender, Keith Harris.

Choosing a Lender: Local VS Online

When it comes to finding a lender for a mortgage loan, many borrowers take the same approach as with most other needs – they resort to the internet. This approach can be very fruitful, but it can also have some pitfalls. Today, we’re going to discuss some of the advantages of working with on-line lenders as well as advantages of working with local lenders.

Often times an on-line search for mortgages will result in finding mortgage brokers that are advertising very competitive rates. While getting the lowest interest rate is a goal for most borrowers, it may come with some unforeseen costs. Mortgage brokers usually have access to multiple investors so that they can “shop around” for low rates when it is time to lock in a loan for their borrowers. Generally speaking, the more investors they have access to, the better chances of getting a very competitive rate.

ONLINE LENDERS
lender computer research jsrealty4uSo why not go on-line to find a mortgage broker that can offer a low interest rate? Because the rate is only part of the equation. Is the broker charging discount points to be able to offer such a good rate? If there are points involved, the lower rate could results in a worse financial scenario for the borrower.

Most mortgage brokers do not participate in the processing or underwriting of the loan. The mortgage broker is just a “middle man” that is paid to link a borrower with an investor and is left out of the most critical part of the loan approval process. They often gather the information from the loan application, along with supporting documentation, and then send it off to the investor so that they can process and underwrite the loan. Many times, the loan will have some “issues” that require additional documentation or explanations from the borrower. In some cases, the broker is not aware of any issues with the loan. Even worse, if they are aware of the issues, they have no control as to how the issues can be corrected or how long it may take to get the problem resolved.

Another important aspect of any loan is the appraised value of the property that is being used as collateral. If your mortgage broker is from a different part of the country, how do you know that they are using appraisers that have a keen understanding of the nuances of property values in the DC Metropolitan area? Just in Northern Virginia alone, property values for similar type homes can vary greatly by zip code, school district, and city. It is important that the appraisers understand these differences when compiling an appraisal report.

LOCAL LENDERS
lender business people interview sell homeSometimes it is important to be able to have a face-to-face meeting between the lender and the borrower. Many borrowers would prefer to hand deliver valuable and sensitive personal financial information versus sending it via email or some other electronic format. In addition, it is also comforting for some borrowers to be able to shake hands with the people that will be making the determination of whether a loan of hundreds of thousands of dollars will be approved.

There are mortgage programs that are specific to a general area or state. Recently, VHDA was offering to pay 3% of a sales price to qualified borrowers purchasing a home in Virginia. The benefit to borrowers qualifying for this program could be as much as $15,000! Having knowledge of these types of programs is essential when determining the best loan solution for borrowers. It is unreasonable to expect a mortgage broker from another part of the country to know about specific programs in your area.

OUR PREFERRED LENDER
JS Realty Intercoastal MortgageIntercoastal Mortgage Company is a local lender with headquarters located in Fairfax, VA and has been providing residential loan solutions for the DC Metro area since 1987. Intercoastal Mortgage Company will fund loans that have been processed and underwritten “in house” at our Fairfax, VA location. Similar to mortgage brokers, Intercoastal Mortgage Company (ICM) has access to multiple investors which allow us to look at various outlets when locking in a rate for a borrower. If the borrower has good credit and income, it may be as simple as seeing which investor has the lowest rate at time of the loan lock. If the borrower has experienced credit challenges, a short sale or foreclosure, ICM has access to investors that will service loans of this type. Perhaps there are programs such as the VHDA grant program that can save thousands of dollars for the borrower. We work very hard to keep updated on all local loan programs.

Because the processing and underwriting is completed “in house”, ICM is able to meet closing dates that many mortgage brokers are unable to meet.

The appraisal process is completed by having access to multiple “local” appraisers that know the DC area very well. The “pool” of certified appraisers that ICM uses have all shown their knowledge of the local area for an extended period of time.

The chart below sums up the advantages of working with a local lender versus an online lender.

Lenders

As you can see, a local lender can access multiple investors to offer very competitive rates, along with excellent service and timeliness that is extremely important in today’s lending environment.

 

JS Realty Keith Harris
Keith Harris
NMLS # 838973


Keith Harris
Senior Loan Officer
Office: 703-259-0788
keithh@icmtg.com

 

 

 

SHORT SALE VS FORECLOSURE

If you are having to decide whether to Short Sell or let the bank Foreclose on your home, it’s pretty obvious that times are tough. You’re having to make some big decisions that will affect your future for a significant amount of time. Making the right choice for yourself and your situation will be key. The best place to start in knowing what is right for you is to understanding the difference between a short sale and a foreclosure.

SaleSHORT SALE
To keep it simple, it means the act of selling short. In real estate terms it means that the borrower owes the lender more money for a property then they are able to get by selling it to the open market. For example, say you owe $300,000.00 for your property but the market says the property is only worth $250,000.00. This means you would be “short” $50,000.00 that you owe. Unless you have that amount laying around and are willing to pay the bank the $50,000.00 that you are short, then you are going to need to ask the lender if they are willing to allow you to sell your property as a “short sale” and forgive you the $50,000.00, plus closing cost that you owe.

Sale JSrealty4uFORECLOSURE
This is the process of taking possession of a mortgaged property as a result of the mortgagor’s failure to keep up mortgage payments. If you can’t make your payments, the bank has come to take back the property to foreclose on it. This will mean you need a new place to live – more than likely sooner than later. Typically a big life event or change is in process, and this situation is not ideal.

So how does a short sale or foreclosure affect you long term, and what does it mean with regards to home ownership and credit in the near future? What about long term?

Below is a chart that shows the “basics” of the amount of time either of these options could affect you. Lending rules change regularly and everyone’s situation is different, so for exact information about how either of these may affect you, we recommend consulting with not only your realtor, but a lender too.

JS Realty Short Sale Years Chart

All in all, you really don’t want to have to face either of these situations, but as we all know, life happens. So, if you find yourself in a tough situation, it is key to contact a Realtor immediately and ask for some direct guidance on how to navigate what lies ahead.

The JS Realty Team specializes in short sales and we have a proven track record of success! If you or someone you know needs help, contact us! We are happy to help in any way that we can.

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