Loan options
FIXED-RATE
Interest rates on Fixed Rate Mortgages are still very low! If you plan to stay in your home for the long term, a consistent payment that never changes can help you prepare for your financial future. Plan your budget with a consistent mortgage payment at a low rate that will stay the same through the life of your loan.
Common types of fixed rate mortgages
The 15-year mortgage
You will pay less in interest. If you borrow $100,000 to purchase a home at a 4% interest rate, paying over a longer period of time will mean more interest on the money borrowed. So, a 15-year mortgage can significantly cut down on the interest that you pay. Add to that the lower interest rates that are often available for 15-year mortgages and you could have some big savings available.
Your monthly payment will likely be higher. Even with the lower interest rate, you will probably have a slightly higher payment with a 15-year mortgage. This happens because you are paying more towards principal from the beginning. But, you will be mortgage-free in half the time, which is no small feat.
The 30-year mortgage
You will pay more in interest. Longer mortgage means more interest charged. This is how banks and other lenders make their money. They loan you, the borrower, money and collect their interest over the 15 or 30 years it takes you to pay them back.
Your monthly payment will likely be lower. Because you are spreading out your payments over a longer period of time, they will almost always be lower with a 30-year mortgage. If your monthly budget is tight, this may be a better way to go.
How it Works
- Monthly payments are based on interest rate, principal loan amount, and amortized interest over 30 years. With a Fixed Rate Mortgage, your interest rate will never change, even if market rates increase!
- Your payment will not change throughout the life of the loan.
- Your actual payment will vary based on your situation and the current interest rates when you apply.
- Pay your mortgage off at any time without pre-payment penalties.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
ARMs
How ARMs work
An adjustable-rate mortgage has an interest rate that can change at predetermined intervals. These adjustable-rate mortgage products can vary in several ways including the amount the rate can increase or decrease at each adjustment, the frequency of rate adjustments, the maximum cap on adjustments, and the length initial fixed-rate introductory period.
An ARM has two important features: the margin and the index. The margin is a specified number of percentage points that never changes, while the index is an interest rate that moves up or down with market conditions. The index plus the margin is the interest rate you pay. Margins are predetermined in your loan agreement and the index is published by an independent financial institution. There are various rate indices that are used as a benchmark for many forms of adjustable-rate financial products. Common indices include the prime rate as reported by the Wall Street Journal bank survey, Fed Funds Rate and the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York.
Why ARM indexes are changing
For years, most adjustable-rate mortgages have used a benchmark rate index called LIBOR – London Interbank Offered Rate. In recent years, LIBOR has been phased out in a coordinated international effort and is being replaced by SOFR. LIBOR was criticized for being too heavily influenced and manipulated by the rate-setting banks. To reduce the manipulation and create an index based more closely on the rates US Financial Institutions are charging each other SOFR was adopted as a replacement.
When the change is happening: The transition to SOFR loans has already begun. Fannie Mae and Freddie Mac won't buy Libor ARMs around September of 2020 at which time many banks stopped offering LIBOR based ARM products.
The Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture were scheduled to stop insuring or guaranteeing new Libor ARMs at the end of 2020.
As of early November 2020, Libor ARMs were still available for jumbo mortgages, but jumbos will have to move away from Libor by the end of 2021.
Shopping for a SOFR ARM
Adjustable rate mortgages can be advantageous for borrowers who have a shorter term outlook for the home they are buying. According to the National Association of Realtors, median homeownership duration is 13 years. Homeowners on the shorter end of that spectrum who may need to upgrade/downgrade or move for work within a 5-10 year period could capitalize on the lower introductory rate of an ARM product. Many ARM’s have an initial fixed rate introductory period of 5, 7, or 10 years which means their interest rate will be fixed for the majority of their period of homeownership. That initial fixed rate could offer sizeable savings in comparison to a 30 year fixed mortgage product.
What will happen to existing Libor loans?
All ARM contracts have language that allows lenders to find a replacement if the loan's index goes away. Eventually, existing Libor-indexed ARMs will be switched over to SOFR. The timing has yet to be worked out, depending partly on when British regulators call it quits on Libor.
On this side of the Atlantic, regulators have stressed the need for an "effective transition." The lender must provide notice 60 to 120 days before the first payment under the adjusted rate.
FHA HOME LOAN
An FHA Home Loan may get you into a home with a low down payment. An FHA loan provides a government-insured loan with flexible loan options. One of the biggest hurdles that first time homebuyers face is saving up for a sizable down payment on a home. Even experienced homeowners may need to plan for a long time for a new home purchase. Fortunately, FHA loans may help some buyers get into the home of their dreams with a lower down payment.
What is an FHA loan?
FHA loans are mortgages backed by the U.S. Federal Housing Administration. Lenders, such as banks and credit unions, that provide FHA loans provide funding for home purchases while requiring a lower down payment. Buyers may get into a new home with as little as 3.5% down.
Using conventional loans, a lower down payment requires the borrower to get private mortgage insurance. This special type of insurance protects the lender just in case the borrower is not able to pay. The cost of PMI is added to the monthly payment until the amount of the loan reaches 20%. FHA loans, on the other hand, do not require PMI because they are backed by the U.S. government. Additional scrutiny is often required during the loan application process using an FHA loan.
What is required for an FHA loan?
Many of the same documents are required for an FHA loan that any potential lender will want to see: employment history, appraisal, debt-to-income ration. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, more if they have a credit score below 580. FHA loans are only available for the borrower’s primary residence.
Credit requirements may also be lower for FHA loans, given other factors demonstrate that the borrower is able to manage their money responsibly. Each lender looks at individual applications and may ask for additional documentation or explanations. They are often able to work with buyers with a lower credit score or shorter credit history than in other situations.
How FHA Loans Work
- Purchase your home with as little as 3.5% down payment (compared to 20% required on most loans).
- 30-, 25-, 20- and 15-year terms are all available with fixed rates.
- 5-year adjustable rate mortgage available.
- Pay your mortgage off at any time without pre-payment penalties.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**My City Mortgage is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.
VA HOME LOAN
Are you a military service member or veteran looking to buy a home? As a benefit of your service, the Department of Veterans Affairs offers unique resources to help those with military experience purchase a home with a low or zero down payment. The VA Loan is a valuable tool that military members and veterans may use to pursue home ownership. VA Loans offer flexible options as either Fixed Rate or Adjustable Rate mortgages.
VA loans are available and provide the buyer the chance to finance 100% of the purchase price of the home. This means no down payment is required. It is important to note that buyers will still need to qualify for the loan. This means that lenders will look at their credit and ability to pay the mortgage. If you are in a troubling financial position, a lender may want to see you pay down debt or save up money before they are willing to give you the loan.
You may also be responsible for closing costs, such as recording the title or paying lawyers to draw up all paperwork. This is negotiable with the seller and something to discuss with your realtor before making an offer on a home.
The VA Loan process
A VA loan works the same as most other home purchases, with a buyer making a written offer to purchase a home under specific conditions (price, closing cost assistance, other contingencies), and then going through an approval process with a lender. The key difference with a VA loan is that the Department of Veterans Affairs requires that all homes purchased through this program meet certain habitability requirements. They will send out a home inspector and appraiser to make sure that the home is in good working order and is worth what you are paying.
This step may sometimes cause delays, especially if repairs are needed after the inspector looks around. Issues at the home do not necessarily mean that the buyer cannot use the VA loan, just that repairs will need to be done before the home purchase can be completed. The VA recently started offering a VA loan to be used for homes that need renovation on a limited basis.
How VA Loans Work
- Purchase your home with as little as 0% down payment.
- 30-, 25-, 20- and 15-year terms are all available with fixed rates.
- 5-year adjustable rate mortgage available.
- Jumbo VA loans available.
- VA Streamline Refinance with a reduced funding fee and flexible documentation requirements – available for veterans currently in VA loans.
- No monthly PMI (Private Mortgage Insurance).
- VA loans are governed by the U.S. Department of Veterans Affairs.
- Pay your mortgage off at any time without pre-payment penalties.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**My City Mortgage is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.
RENOVATION LOANS
Fix up your fixer-upper home with a Renovation Loan. If you have found the perfect home but it needs renovation, you can purchase the home and roll the costs of the renovation into your loan.
An FHA 203(k) Loan, allows buyers to finance the cost of the home and the renovation in one mortgage with a low rate.
Fannie Mae Homestyle & Freddie Mac Choice are renovation loans that follow conventional guidelines.
The VA also offers a similar renovation option for military and veterans to purchase a home and finance the required renovations to bring it up to standards set by the VA.
USDA renovation loans are 100% financing loans backed by the U.S. Department of Agriculture.
Rehab loans have similar pre-qualification requirements to a standard Conventional, FHA, VA or USDA loan - with additional documentation needed to be related to the renovation.
To view our complete renovation guide, click here.
USDA LOAN
USDA Loans offer flexible options as either Fixed Rate or Adjustable Rate mortgages. You may qualify with less than perfect credit. Buying a home with little or no down payment can provide opportunities for buyers that otherwise may not be able to become homeowners. Fortunately for today’s buyers, there are a few programs that can help them qualify for a mortgage with a very small down payment. One that is not widely discussed is the USDA Single Family Housing Guaranteed Loan Program.
What is a USDA home loan?
The United States Department of Agriculture, USDA, administers the program but does not actually loan money. Similar to loans backed by the Department of Veterans Affairs, VA, or Federal Housing Administration, FHA, these loans are guaranteed by the USDA. Private lenders, such as banks or credit unions, still loan money to the home buyer but they know that the USDA will pay if the borrower is unable.
This allows lenders to assume less risk, and as a result they are okay requiring less money down.
Who can use the USDA program?
Contrary to its name, the USDA loan is not only available for those in an agricultural setting. The USDA loan is designed to help “low and moderate income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas.”
To use the USDA loan, applicants must meet income requirements and be purchasing a home for their own primary use in an eligible area. Potential homeowners can look up each property’s address to see if it qualifies or talk to a lender about using a USDA loan in their area. The loan can be used for new homes, existing homes, and even homes that need some renovations.
If coming up with a sizable down payment is holding you back from your dreams of home ownership, the USDA loan may be just the answer you are looking for.
How USDA Loans Work
- Purchase your home with as little as 0% down payment.
- 30-, 25-, 20- and 15-year terms are all available with fixed rates.
- 5-year adjustable rate mortgage available.
- No monthly PMI (Private Mortgage Insurance).
- USDA loans are governed by the U.S. Department of Agriculture.
- Pay your mortgage off at any time without pre-payment penalties.
Qualification Requirements
- Household income limits apply and are based on location.
- Only available in certain areas. Talk to a specialist today to see if it is an option for you!
- Buy a home with no money down (primary home).
- Refinance up to 100% of your primary home’s value.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**My City Mortgage is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.
PHFA LOAN PROGRAMS
The Pennsylvania Housing Finance Agency (PHFA or the Agency) offers home purchase loans with competitive interest rates and lower fees. View our guides below:
JUMBO HOME LOAN
Jumbo Homes Loans can make high-end home purchases possible. When a loan amount reaches a certain point, Jumbo and Super Jumbo Loans can offer high-end financing that a traditional loan can’t.
Over the past few years, some lenders have decreased their Jumbo Loan offerings and have made them harder to obtain. At My City Mortgage, we can get you a great rate on your Jumbo Loan.
With a jumbo mortgage, you’ll get great rates even on a large home purchase. With a choice between fixed or adjustable rates, our jumbo loans offer maximum flexibility for home financing for larger loans.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
FIRST TIME HOME BUYER
Buying your first home is a very exciting step! My City Mortgage loan specialists are here to guide you through every step of the loan process.
Before finding your new home, we can help you get pre-qualified for free. We can also match you with a trusted real estate agent through our partner networks. Our variety of loan options allow you to buy your first home with little money down and we will work to ensure the loan payments meet your unique needs.
First time home buyers have a lot of questions and our loan specialists are always available to provide personal attention. They can explain the application process, provide tips to use during your home search, and make sure that you find the perfect home for your needs and budget.
Popular Loan Programs for First-Time Home Buyers:
30-Year Fixed Rate Mortgage
The most secure loan program. Lock in a low payment and sleep tight knowing that your rate will not change.
FHA Loan
Perfect for the buyer that wants to put less money down. Purchase your house with as little as 3.5% down!
VA Loan
An amazing deal for veterans and military members. Those who qualify for this loan can purchase with no down payment and no PMI. Find out today if you qualify!
LOW DOWN PAYMENT OPTIONS
Not ready for a sizable down payment? There are options that can make you a home owner with a low down payment.
Deciding on how much money to use as a down payment can be confusing. My City Mortgage is here to help. The route for each buyer or investor depends on their situation and personal preferences.
Low Down Payment Options
FHA Loan
You can purchase a single-family home or condominium with as little as 3.5% down payment using an FHA loan, but there is a price for lower down payments on conforming loans: mortgage insurance (often called PMI, private mortgage insurance).
Mortgage insurance is required when the conforming loan amount is MORE than 80% of the purchase price (practical translation: down payment is less than 20%). Also, the lower the down payment, the higher the premium ratio charged.
USDA Loan
Is your dream home surrounded by pasture and farmland? Buyers in rural and suburban markets may be able to use a USDA loan, which requires no money down.
Household income limitations do apply and buyers should expect to pay PMI if their down payment is less than 20%.
VA Loan
Military veterans who qualify for a VA loan can purchase a home with no money down. VA loans can provide up to 100% financing for qualified military personnel and veterans.
There are also non-conforming mortgage loan programs available that allow for 80/20 set-ups, which allow borrowers to obtain a second mortgage to cover the 20% down payment.
Have less than perfect income and credit? We may have a program that fits your needs!
How much should I use for a down payment?
There are costs and benefits to any option, including those with low down payments. You should carefully consider your options and discuss your plan with a professional.
Talk to one of our loan specialists today to come up with a customized solution that best fits your needs and budget.
Cost of a Lower Down Payment
Low or no down payment programs have two primary costs that result in a higher monthly payment:
- Higher interest rates
- Higher mortgage insurance premiums.
Mortgage insurance can be removed once sufficient equity is produced. For example, if the property shows at least 20% equity in a few years, the mortgage insurance can be refinanced away.
Benefits of Lower Down Payments
Though the disadvantages of low down payments seem serious, there are also advantages. Take time to weigh the two and assess which is the best for you.
The chief benefits of lower down payment include the following:
- Less money out of pocket at the time of purchase.
- Higher rate of return. Your property’s appreciation will be the same whether you put 3%, 5%, or 20% down. In fact, your rate of return actually decreases as you make a larger down payment, as discussed below.
- Opportunity cost. In some cases, the smart investor can make more money from available cash by placing it in other investments.
During the first few years of the mortgage loan, the bulk of your monthly payments go towards paying interest – which is usually tax-deductible. So you get quite a bit of your monthly payments back at the end of the year in the form of tax deductions.
Personal Consideration
Carefully consider the amount of money that you want to put down. Your lender will qualify you for a certain level based on your income; however, that amount may be different from the level that you feel comfortable paying each month. You must decide what you can afford.
Talk to your loan officer at My City Mortgage about the best situation for you.
INVESTMENT PROPERTY LOANS
Ready to reach financial independence through real estate? Whether you are looking for an investment property or a vacation home to spend relaxing days, My City Mortgage can bring the same level of personalized attention and service to all of your real estate purchases.
Your dream home might be within reach! My City Mortgage can help with investment property loans. Our prequalification process will ensure that you are ready to buy and we can help you find a real estate agent to meet your needs.
Mortgage Loan Programs for Vacation and Investment Homes
30-Year Loan
Take advantage of low rates by locking into a low payment with a traditional 30-year loan.
You may be able to qualify for owner-occupied financing with lower interest rates, based on your use of the home. Talk to a loan specialist to find out what programs offer the best terms for your situation.
15-Year Loan
Get the same security of a 30-year fixed rate mortgage, but pay your mortgage off in half the time. This means paying less in interest and owning your home sooner! This translates to greater monthly income from your investment.
Get Pre-Qualified
Great investment properties are out there but are often purchased by buyers “in the know” quickly. Increase your bargaining power by getting pre-qualified with us today.
REFINANCE
Ready to pay less in interest on your mortgage and lower your monthly payments? A refinance may be the right step for you.
A mortgage refinance is the replacement of an existing mortgage with another mortgage under different terms. Mortgage refinancing can lower your monthly payments, which can add up to significant savings.
Knowing your current refinance mortgage rates is important. My City Mortgage can keep you informed and help decide when a refinance may be best.
Reasons to consider a mortgage refinance:
- Reduce your monthly mortgage payment: Mortgage rates are still very low. A refinance with My City Mortgage may help you lower payment and possibly save you money.
- Consolidate high interest debt: You could pay off those higher-interest debts by refinancing with a lower rate. Even with less-than-perfect credit, we can help you lower your monthly payment and pay off your higher-interest debt. By consolidating your payments into one low monthly payment, you can pay less each month, lower your debt, and improve your credit score.
- Pay Off Your Mortgage Faster: The shorter the term on your mortgage, the lower your mortgage rate. Did you know that you may be able to take advantage of today’s competitive rates by shortening the term of your loan (which means paying less interest) without a significant change in your monthly payment?
When to Refinance Your Mortgage?
We offer information on a variety of mortgage refinancing rates and options. When you are ready to take the next step, contact My City Mortgage. We can advise you on which mortgage refinancing program meets your needs.
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