Looking to simplify your home buying process? It is important to work on getting your financing ducks in a row before looking for a home.

Check out the latest “One Cool Thing” from the California Association of Realtors about seeking financing when buying a home:

Most home buyers are following their realtors advice and seeking financing first in their home buying journey. They also want greater speed, simplicity and communication from their providers.

• 73.5% sought out home financing options before looking for a home.
• 75.4% said their agent and lender communicated with each other about their home buying process.
• 49.5% desire a faster or easier home buying experience.
• 34.1% had trouble understanding mortgage fees.

Source: loanDepot and mellohome

The Lawhead Team would like to share the latest One Cool Thing about borrowers views on making the mortgage process a little bit easier:

Home buyers want the mortgage process to be less onerous and faster, but they also want more personal interaction as they navigate a transaction.

Borrowers views on how to make the mortgage process easier:

• 27% reduction in paperwork
• 20% easier to shop and compare terms from lenders
• 16% less back and forth during the process

Mortgage shoppers want the person-to-person interaction:

• 65% prefer a person to explain mortgage terms and options
• 58% want assistance reviewing final loan documents
• 58% prefer a person to help them review final documents
• 56% want help singing loan documents

Source: Fannie Mae National Housing Survey

Planning to apply for a mortgage? Borrowers have been impressed with the smooth process The Lawhead Team provided for them!

Finding the right home loan.

Just as you shop for a home, it is important to shop for what type of loan will be best for you and your family.

The Lawhead Team would like share some common home loans and why they are beneficial. If you have any questions about applying for a home loan, please call us and we would be happy to help steer you in the right direction.

30 Year Fixed – A 30 year fixed is a loan where interest and mortgage payments remain the same for 30 years, at which time you will have paid back the entire loan. This is good for those who prefer the security of fixed-monthly payments like fixed-monthly mortgages. Often, this loan is more expensive than its adjustable-rate counterparts, but is easier to understand and provide the greatest payment stability. If you can afford this loan and plan to be live in your home for 10 or more years, this may be the best option for you.

15 Year Fixed – These are mortgages where interest and mortgage payments remain the same for 15 years, at which time you will have paid back the entire loan. These loans offer the lowest fixed rates but have the highest monthly payments because you are paying off the loan in a shorter time-frame. This is good for those who prefer the security of fixed-monthly payments and can afford the higher monthly payments of a 15-year term like this loan. You will build equity quickly, but the high monthly payments may restrict the overall price of the home you can afford.

ARMs – Adjustable-rate mortgages (ARMs) are mortgages where the interest rate you pay adjusts at a specified time and frequency. There are many different ARM products, but generally they offer a lower initial rate than a 30-year fixed and they adjust with market trends. Therefore, when your initial rate period ends and your ARM is ready to adjust you may be paying more (with higher current market trends) or less (with lower current market trends) than your initial rate. Generally, ARMs follow this pattern: the shorter the initial term, the lower the initial rate.

Interest Only – These are fixed or adjustable rate mortgages where you the option of paying interest only for a specified term, usually five to ten years. After the initial term the mortgage switches to a fully-amortizing loan for the remainder of the loan. This is good for people who expect their financial situation to change in the near future. Young professionals like doctors and lawyers may also prefer this loan since they believe they will be making significantly more money in the future than they do now.

Payment Option “flex pay” – These are mortgages where you have the option of paying different amounts each month. Usually, the monthly payment options include a low payment option, an interest-only option and an interest plus principal option. The low payment option creates negative amortization and usually adjusts yearly with a maximum rate cap. This is good for people that do not have steady incomes may like this loan. It provides the most flexibility from month to month.

The Lawhead Team knows there are many different types of loans one can apply for when buying a house. We would like to compare the two most common loans, Conventional loan and FHA loan, for our readers.

An FHA loan is a loan which is backed by the federal government and issued by participating lenders. With a conventional loan there is no such guarantee and the risk is assumed by the lending bank or other loan stakeholders.

A conventional loan lender will follow stricter Fannie Mae and Freddie Mac underwriting guidelines which require good credit, strong financial status and lower loan-to-value ratios. On the other hand, because of government intervention with an FHA loan, you must go through a more complicated approval process.

Conventional Loans vs. FHA loans –

• FHA loans only require a down payment of 3.5 percent which can be funded using borrowed or gift money while a conventional loan requires at least 10 percent down.
• To qualify for a conventional loan you must have a credit score of at least 620 however anything below a 740 will result in higher mortgage payments.
• Because a conventional loan requires a higher down payment, the borrower will be able to build equity faster. Because FHA loans require a comparatively lower down payment, borrowers are required to pay a mortgage insurance premium (MIP).
• FHA loans are suitable for applicants with bad or no credit. Conventional loans are suitable for those with sufficient cash and healthy financial conditions.
• FHA loan borrowers are required to pay a 1.5 percent upfront fee and a monthly 0.5 percent premium for the FHA mortgage insurance, which is designed to protect lenders from losses arising from mortgage defaults.