The term refinancing means to take out a new loan. This new loan will replace your current loan by paying it off and beginning a new loan and new agreement. Typically homeowners refinance to save money by obtaining a lower monthly interest rate and/or mortgage payment. Be sure to consider your length of term on the new loan when refinancing so you are not paying more money over time. If your interest rate is lower, but your term is longer, you may be paying more in total.
FHA loans are loans provided by private lenders. They are regulated and insured by a government agency, (FHA) The Federal Housing Administration.
FHA loans are provide benefits different from other loans.
- Allow a lower down payment from the borrower.
- Allow borrowers to have lower credit scores.
- Have a maximum loan amount varied by county.
The RHS is a part of the U.S. Department of Agriculture (USDA). The Rural Housing Service (RHS) offers mortgage programs to help low- to moderate-income rural residents to purchase, construct, and/or repair their homes.
The RHS lends directly to qualified borrowers and also guarantees the loans made by their approved lenders.
A VA-backed loan is a loan available through a program from the Department of Veterans Affairs (VA). These programs are intended to help service members, veterans, and even their families purchase their homes. The DVA does not provide the loans, however, they determine who may qualify and the terms under which mortgages may be offered. The loans are typically available only for a primary residence.
A reverse mortgage is a type of loan that typically allows homeowners, age 62 or over, to borrow against the value in their homes. This type of mortgage is insured by the Federal Housing Administration (FHA) and is otherwise called Home Equity Conversion Mortgage (HECM). Equity refers to the amount your home is currently worth, minus the amount of any existing loans on your home. It is called a “reverse” mortgage because, instead of making payments to the lender, you would receive money from the lender. The money you receive, and the interest charged on the loan, increases the balance of your loan each month. It is important to understand, over time, the total loan amount due will be growing as money is borrowed.
A conventional loan is any mortgage loan that is not insured or guaranteed by the government or its agencies. FHA- Federal Housing Administration, VA-Department of Veterans Affairs, or USDA- Department of Agriculture are loan programs backed by the government.
Mortgage insurance is typically required if the down payment you are making when taking out your loan is less than 20 percent of the total loan amount. It is designed to protect the lender if you were to be late on your payments. Mortgage insurance also is usually required on FHA and USDA loans. Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay if you have are using a conventional loan. You can remove your mortgage insurance payment potentially by refinancing your loan. Be sure to ask us about this when we discuss your loan/refinance options .
A finance charge is the total amount of interest and loan fees you will pay over the entire length of the mortgage loan in addition to the amount borrowed.
This will be the amount charged for the current loan you have until the last payment is made and would also include any loan charges paid.
Possible loan charges but not limited to:
- Origination charges
- Discount points
- Mortgage insurance
- Other applicable lender charges
Escrow is an account used to set aside a part of your monthly payment by your mortgage lender for paying certain expenses; property taxes and homeowners insurance. This type of account will ensure you have money available to pay your mortgage expenses when they become due. The lender will use the money from the account to pay the expenses on your behalf. Another name for an escrow account is an impound account.
Not all mortgages require an escrow account. If your mortgage loan does not have an escrow account, then you will be responsible for making your property taxes and homeowners insurance payments, directly out of pocket, when they are due.