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Loan Types

 

For many, homeownership means investing in the future. The equity you build is yours to keep and while it may be more challenging to buy a home early in life, owning a home offers the potential to help build a healthy future and peace of mind.

The first stage in applying for a mortgage is typically prequalifying for one. Your credit score determines your interest rate, loan choices and your minimum down payment. Ultimately, the maximum size of your loan amount will be determined by your debt-to‐income ratio (DTI), which is the percentage of monthly gross income that goes towards paying debts. In general terms, the lower your DTI, the more you may be eligible to borrow and the more financing options may be available to you.

It’s best to have information and paperwork ready throughout the prequalification and loan application process.

You will typically need:
• One or two W-2 forms
• Payment stubs and tax returns
• Records of your savings and investments
• Minimum two-year job history, which may include some college or university work in a related subject area
• Minimum two-year history of good credit
• Three or four trade lines on your credit report
• Demonstrated ability of paying bills on time

If you are self-employed, optimizing your savings, credit score, down payment; minimizing your debts; and maintaining an up-to-date profit‐and-loss statement is a good strategy. Your income will generally be computed using your past two tax returns.

By furnishing any and/or all of the documentation, an applicant is in no way obligated to accept the terms and conditions of the mortgage offered, nor does the borrower have to provide these documents to receive a Loan Estimate.

30-Year Fixed Loan

A 30-year fixed-rate loan is a favorite when it comes to home financing. Especially right now, it’s a superb way to lock in a low interest rate, generally between four and six percent, and relatively low and stable monthly payments. Those payments, covering principal and interest, remain the same over the life of the loan. Necessary adjustments are made only to the optional escrow account, which pays for homeowners insurance and property taxes. These expenses can be paid separately. The 30-year fixed-rate mortgage does have slightly higher interest rates than shorter-term loans, must be refinanced to take advantage of declining interest rates, and prevents homeowners from building substantial equity during the early years of the loan since their payments are initially allocated more towards interest. However, those interest payments can result in substantial write-offs on yearly tax returns.

Benefits of a 30-Year Fixed‐Rate Loan:
• Relatively low and stable monthly payments
• The potential to lock in a low interest rate for 30 years

Example Loan Scenario:
• Loan Amount $223,373**
• Loan to Value from 75.01% – 80%
• Interest Rate 3.637% and Annual Percentage Rate 3.705%
• Loan Term 30 years

**Loan scenario based on owner occupied, conventional loan for borrowers with FICO scores 720-739 and Debt to Income of 40.01% – 43%.

This scenerio is for illustrative purposes only and interest rates are subject to change.

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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15-Year Fixed Loan

Fifteen-year fixed-rate loans grow in popularity when interest rates are as low as they are now and they can fit wonderfully into long‐term home financing. When compared to 30-year fixed-rate mortgages, 15-year loans offer lower interest rates, allow you to build equity more quickly and can easily save in interest payments.

Paying for your home as quickly as possible is recommended by many money pros. This allows you to meet your other goals – like saving for retirement and paying for your children’s education much more easily. It is an exceptionally good time to apply for a 15-year fixed‐rate mortgage since you can lock in a competitive rate and a stable monthly payment. Adjustments are only made to the optional escrow account, which covers homeowners insurance and property taxes. However, these expenses can be paid separately.

Fixed‐rate loans, in general, must be refinanced to take advantage of lower interest rates and a 15‐year loan has a higher monthly payment than a 30‐year loan. So you will generally have to buy a less expensive house to afford this type of loan.

Benefits of a 15-Year Fixed‐Rate Loan:
• Lower interest rates
• Allows you to build equity more quickly

Example Loan Scenario:
• Loan Amount $328,000*
• Loan to Value from 75.01% – 80%
• Interest Rate 2.875% and Annual Percentage Rate 2.959%
• Loan Term 15 years

**Loan scenario based on owner occupied, conventional loan for borrowers with FICO scores 720-739 and Debt to Income of 40.01% – 43%.

This scenerio is for illustrative purposes only and interest rates are subject to change.

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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Adjustable Rate Mortgage

An adjustable rate mortgage (ARM), is a loan in which the interest rate varies according to a predetermined schedule. The initial interest rate will be fixed for an allotted period of time, after which it is reset periodically. For example, a 5/1 ARM locks in the current interest rate for five years. After that, however, the rate for that particular product will change based on a predetermined index + margin with a cap. ARMs could start with better interest rates than fixed-rate mortgages, in order to compensate the borrower for the risk of future interest rate fluctuation.

If you only plan to live in your new home for a few years, this could be a helpful option.

Benefits of an Adjustable Rate Mortgage:
• Potential to lock in a low interest rate and, if needed, sell your home before it rises
• Could offer lower interest rates than fixed-rate loans
• Rate adjustments could have caps to keep them from going too high
• Rates could possibly go down, saving you money

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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FHA Loans

The popularity of FHA loans has skyrocketed in recent years. The federal government backs FHA loans so they have relatively competitive interest rates, less stringent underwriting standards and require smaller down payments. They’re particularly appealing to young, first-time homebuyers who lack substantial credit histories and cash reserves, especially since loan underwriters permit non-traditional lines of credit, like car payments and utility bills.

Down payments may be as low as 3.5 percent, gifted, and buyers don’t need financial reserves beyond immediate closing costs. Also, an applicant may co-sign with a non-occupant co‐borrower like a parent to offset many issues.

These loans are relatively easy to refinance and are relatively forgiving of bankruptcies and foreclosures. They simply require a two-year wait time following a discharge. However, be prepared for stricter appraisals, strict accounting of income, and lower loan limits. Also, FHA loans don’t work for investment and vacation homes and a spouse’s debts can work against you, even if the spouse doesn’t co‐sign.

Benefits of FHA Loan:
• Easy to refinance
• No cash reserve requirement
• Down payments may be gifted
• Relatively competitive interest rates
• Down payments as low as 3.5 percent
• Less stringent underwriting requirements
• Allows the buyer to co‐sign with a non‐occupant co‐borrower

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

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VA Home Loans

VA loans are a key benefit for U.S. veterans, offering competitive interest rates, no down-payment loans, no required mortgage insurance and less rigorous underwriting standards.

Benefits of VA Loan:
• Easy to refinance
• No down payment necessary
• No required mortgage insurance
• Competitive interest rates
• Less rigorous underwriting standards

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts
• Certificate of eligibility

Additional documentation may be requested.

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Jumbo Mortgage

With today’s low interest rates, jumbo loans have become increasingly popular. They allow some buyers to afford dream or luxury homes with larger, often non-conforming, mortgages at slightly higher interest rates than conventional loans. With fixed-rate jumbo loans, buyers can currently lock in competitive rates and stable monthly payments for years to come.

Jumbo loans generally exceed the limits of conventional, government—backed loans, which tend to be capped at $424,100 in Texas. Buyers must typically make a down payment of 20% to qualify for jumbo loans.

Benefits of Jumbo Loan:
• Enable buyers to apply for larger home loans
• More opportunity to negotiate fees and interest

What You Need:
• Your driver’s license
• Your social security card
• Payment stubs for the past month
• Contact information for your landlord
• Copies of your past two tax returns if you are employed
• Copies of your past three tax returns if you are self employed
• An accounting of regular monthly bills, including account numbers
• A profit and loss statement for the current year if you run a business
• Three months of statements for all of your savings and investment accounts

Additional documentation may be requested.

 

 

Ascent Home Lending, LLC

NMLS 1031959 | 5600 W Lovers Lane Ste 211 | Dallas, TX 75209

Office: 214.353.7701 | Fax: 866.881.1779

Jonathan Doddridge, Residential Mortgage Loan Originator

NMLS 657641

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