A Jumbo loan is a loan for more than the conforming loan limit set by Fannie Mae, Freddie Mac and the Federal Housing Finance Agency (FHFA). The conforming loan limit can change annually, which affects the amount of a Jumbo loan. Talk to a loan originator for exact details in your area.
Archives: Mortgage FAQs
What is Private Mortgage Insurance (PMI)?
PMI insures your lender for part of your loan, not the full amount, if the loan is not repaid. This typically applies to conventional loans.
PMI may be necessary when a down payment is below 20%. Depending on the credit history of the homebuyer, PMI may cost between approximately 0.25% – 2.00% of the amount borrowed. And if you eventually build 20% equity in your home, you may be able to ask the lender to cancel the PMI.
An FHA loan is an insured loan made by the private lender that allows borrowers to purchase with a down payment as low as 3.5%.
VA loans don’t have any PMI requirements even though they allow a 0% down payment, but have a VA Funding Fee.
How can I build my credit score?
Your credit limit is determined by your security deposit. You can use your secured credit card like any credit card to make purchases such as gas or groceries, or for recurring phone bills, without changing your total monthly budget. And, just like a credit card, you make monthly payments of principal and interest. Some cards, like the Capital Bank OpenSky® Secured Visa® Credit Card report to all three major credit bureau monthly. You can open an account for as little as $200 or up to $3,000 (subject to approval). By managing credit responsibly, you can improve your score.
Can I qualify for a Federal Housing Administration (FHA) loan?
An FHA loan is a government insured home loan with more flexible lending requirements than conventional mortgages. It’s available for homeowners with down payments as low as 3.5%. The lower credit score requirements may make it a good option for a first-time home buyer or a home buyer needing a lower down payment.
While mortgage insurance can be more costly than a Conventional loan, it could be a great option to get you into your first home.
Do I need to put down 20%?
There may be alternatives to providing a 20% down payment on the purchase of your home. By paying Private Mortgage Insurance (PMI) premiums with your monthly payment on a Conventional loan, the down payment requirement may be reduced to 15% down, 10% down, 5% down and in some instances for a 1st time homebuyer even as little as 3% down. Some other options include FHA insured loans which require as little as 3.5% and also have Mortgage Insurance Premiums (MIP). Veterans Administration (VA) guaranteed loans also have low down payment options. To learn about PMI check out our FAQ on Private Mortgage Insurance.
What’s an Adjustable Rate Mortgage (ARM)?
An ARM is a loan with an interest rate that changes at the scheduled adjustment date based on movements in an index rate, such as the rate for Treasury securities. ARMs usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates increase, generally your loan payments increase; and when interest rates decrease, your monthly payments may decrease. Depending on the type of ARM loan, the interest rate and monthly payment will change every month, quarter, year, three years, five, seven or ten years. The period between rate changes is called the adjustment period. For example, a loan with an adjustment period of one year is called a one-year ARM, because the interest rate and payment change once every year; a loan with a three-year adjustment period is called a three-year ARM.
Some ARMs have interest-rate caps and the cap may hold your rate and payment below what it would have been if the change in the index rate had been fully applied. Since the increase in the interest that was not imposed due to the rate cap the amount it could adjust to will carry over, at the next future rate adjustment, your payment might increase, even is the index rate has stayed the same or declined.
What’s a fixed-rate mortgage?
This is often considered for homebuyers who intend on staying in their home for several years, a fixed-rate loan has a predictable monthly payment for the life of the loan. The duration of the loan impacts the dollar amount of the monthly payment, amount of interest paid, amount of time to build equity in a home, and length of time to pay off the loan.
Longer term loans have lower monthly payments and pay more interest over the life of the loan, taking longer to build equity and pay off the mortgage.
Shorter term loans have higher monthly payments and pay less interest over the life of the loan, taking less time to build equity and pay off the mortgage.
In general, the longer your loan term, the more interest you will pay. Loans with shorter terms usually have lower interest costs but higher monthly payments than loans with longer terms.
Can I use my own title company?
Yes, you may use your own title company or use one from our preferred provider list. The lender, nor anyone else, can require you to purchase the insurance from a particular title company for either the lender’s coverage title insurance or the optional owner’s coverage title insurance. The title insurance and coverage must meet the lender requirements, though for the lender’s coverage.
Will I be required to purchase title insurance?
Yes. Your lender will want to be sure the property has a clear title and will require a Lender’s Coverage Title Insurance policy. It is optional to purchase an Owner’s Coverage Title Insurance policy to protect yourself from threats to your title and ownership that may have gone undiscovered at the time of closing.
Does a Capital Bank Home Loan have discount points?
You always have the option to buy down the interest rate by paying discount points.