Most California and Bay Area homes are financed through conventional fixed rate home loans. These home loans offer an unchanged or ‘fixed’ principal and interest payment throughout the life of the loan. The standard fixed rate loan terms are 10, 15, 20, 25 or 30 years, however 15 and 30 years are the most common. By choosing a shorter loan term, you can achieve significant savings in interest over the duration of the loan. There are also custom term mortgages if desired.
To buy a home in the Bay Area where house prices often exceed $1 million, a jumbo loan may be needed. These loans can be fixed rate or variable interest depending on your financial situations and goals. However, jumbo loans can be slightly difficult to qualify for, with more stringent credit requirements and a larger down payment necessary. There is also an alternative to do a 1st and 2nd mortgage combination.
What is a FHA Loan?
In 1934, the Federal Housing Administration (FHA) was established to improve housing standards and to provide an adequate home financing system with mortgage insurance. Now families that may have otherwise been excluded from the housing market can finally buy their dream home.
FHA does not make home loans, it insures a loan; should a homebuyer default, the lender is paid from the insurance fund.
- Buy a house with as little as 3.5% down.
- Ideal for the first-time homebuyers unable to make larger down payments.
- The right mortgage solution for those who may not qualify for a conventional loan.
- Down payment assistance programs can be added to a FHA Loan for additional down payment and/or closing cost savings.
What is a VA Loan?
The Veteran Administration’s Loan originated in 1944 through the Servicemen’s Readjustment Act; also-know-as the GI Bill. It was signed into law by President Franklin D. Roosevelt and was designed to provide Veterans with a federally-guaranteed home loan with no down payment. VA loans are made by private lenders like banks, savings & loans, and mortgage companies to eligible Veterans for homes to live in. The lender is protected against loss if the loan defaults. Depending on the program option, the loan may or may not default.
Who is eligible for a VA Loan?
- Veterans who were NOT Dishonorably Discharged, and served at least 90 days
- Veterans Administration website va.gov
At least 181 days of continuous active duty with no dishonorable discharge. If you were discharged earlier due to a service-related disability you should contact your Regional VA Office for eligibility verification.
Reserves and National Guard
- The spouse of an Armed Forces member who served Active Duty, and was listed as a POW or MIA for more than 90-days.
When I should refinance?
It’s generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you’re saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.
How much will it cost me to refinance?
Starting with an application fee for $250 – $350, you may need to pay an origination fee typically 1% of your loan amount. In most cases you will pay the same costs you had with your current home loan for the title search, title insurance, lender fees, etc. The total sum could cost up to 2-3% of the loan amount. If you don’t have the funds to pay for associated loan costs, you can search for lenders that offer “no-cost” loans which will charge a slightly higher interest rate.