An increasingly attractive mortgage option is what is referred to as the combination loan or combo loan. Combination loans have several key advantages over traditional 30-year mortgage loans and there are a wide variety of combinations to suit most financial situations.
By far, the most popular combination mortgage loan is the 80/20 loan. This loan is actually two loans; the first loan is for 80% of the homes value, and the second loan is for the remaining 20%. With the 80/20 mortgage loan, the buyer pays no down payment and is ideal for those without a significant amount of savings. Another key advantage of the 80/20 mortgage loan is that the buyer avoids PMI or private mortgage insurance. PMI is required on all mortgage loans that are greater than 80% of the homes value. A third advantage of the combination mortgage loans is that both loans are tax deductible. By avoiding PMI and increasing their tax deduction, a buyer gains a significant cost savings advantage over traditional mortgage loans.
Combination loans are available in many other ratios as well. The 70/30 mortgage loan is usually preferred to the 80/20 loan for more expensive homes, when 80% of the homes value would be classified as a jumbo loan (above the FNMA/FHLMC limit) and subject to higher interest rates.
Another option is the 80/15/5 mortgage loan, where the buyers makes a down payment of 5%. Other options include the 80/10/10, 75/15/10, etc which are all variants of the same.
In combinations mortgage loans, the primary loan usually has a 30-year amortization term, while the second loan can have 30 or 15 year term. Expect the interest rate to be about 2% higher for the second loan. The buyer can opt for a fixed rate mortgage or an ARM (adjustable rate mortgage) on either or both loans. The ARM will have a lower monthly premium and allow for additional cost savings, but be sure to refinance the ARM loans if interest rates start to rise.
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There are two forms of mortgage loans termed as amortized loans and adjustable rate mortgage (ARM). Amortized loans are also called fixed rate mortgage (FRM). The interest rate for an FRM is fixed and hence monthly payment, remains fixed through out the loan which is usually for 10, 15, 20, or 30 years. In an ARM, the interest rate is fixed for a brief period of time, after which it changes annually or monthly. Home equity loans are often termed as mortgage loans as it is a loan taken against a borrower’s house. In Maryland, people need to carefully select a mortgage company that provides home loans. They should verify the different loan packages that are offered with general terms and conditions.
The mortgage-related process known as origination, through which a mortgage is secured by a borrower is rather common in the US. The borrower has to submit an application and other documents related to his or her financial history to the underwriter. In Maryland there are consolidated mortgage corporation that are locally owned and operated by licensed mortgage lender or brokers. They have an access to some of the top mortgage wholesalers across the country. They offer Maryland consumers a wide variety of loans at very competitive prices.
The loans may be for acquiring home loans or refinancing the borrower who has fallen behind on their mortgage and is in need of help.
They also offer same day firm conditional loan approval that is made through various automated underwriting systems. In Maryland, the lenders of mortgage loans stipulate minimum requirements on the funds used for mortgage loans.
There are consolidated mortgage services in Maryland that provide loan representatives in many areas, who personally meet the loan applicants. They also provide facilities of telephonic, as well as online applications, to the consumers. The online mortgage loan services are established to assist homebuyers and homeowners secure the most attractive first mortgage purchase loans, second mortgages, home equity lines of credit. They also provide refinancing options from the major money center banks and financial institutions.
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If you have not purchased a house before, you are probably unfamiliar with the different types of mortgage. The mortgage options are available to give almost everyone the opportunity to loan the amount they need. It is also important that you know your options so that you can make the right decision. Choosing the right mortgage will definitely affect your payment behavior in the future.
Mortgage is normally categorized into two. One has a fixed interest rate and terms of payment. The other has a flexible rate or terms of payment or both. The flexible type is called the Adjustable Rate Mortgage or the ARM. The borrower chooses his preferred arrangement. He usually bases it on his current financial state.
One advantage of choosing a fixed rate mortgage is that you know exactly how much you will prepare to settle your monthly dues. You do not have to worry of it going up. This means that you will have a fixed monthly budget. That amount will be the same until you finish paying the loan. This mortgage loans usually have 15 or 30 year life.
The Adjustable Rate Mortgage on the other hand is different as the monthly payment can go up or down. This will depend upon the condition of the economy and what has been set in the loan agreement. Although the lender will normally set the terms, it should be in accordance with the short term Treasury bill rates. The ARM is normally offered when the prices of the property are going up and when there are relatively high interest rates.
There are people who would prefer the ARM because at the beginning of the term, the interest rate is low. This is also a good option for those who expect their salaries to significantly increase over the years.
Aside from the two major classifications of mortgage, there are also those that are government insured. These are normally granted to individuals who do not have enough income to avail of the regular loan. Examples of these are the FHA loans and the VA loans. In order for individuals to avail of such loans, they have to qualify first. FHA loans are for those with limited income while VA loans are for those who have served the military in the past.
There is also the balloon mortgage. This is a short term loan. The monthly payment made here is lower than the regular loans. In fact, for most terms, the monthly payment is equivalent to the monthly interest. A balloon payment will be made at the end of the term. Those who do not have plans of staying in the property for a long time usually choose this. They sell the house by the end of the mortgage and use the proceeds to make the balloon payment.
There is also the SAM or the Shared Appreciation Mortgage. This happens when a borrower transacts with a third party to pay for a portion of the down payment. Here, the third party will have right to the property purchased. However, the borrower can buy out his right in the future.
Finally, there is the conventional mortgage. Here, a down payment of 20% of the borrowed amount will be required. If the borrower cannot make the payment, the lender will require private mortgage insurance.