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Purchase Mortgage

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Refinance Mortgage

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What is a purchase money mortgage? the simplest definition describes purchase money mortgage as a home loan used to buy a property

Refinance

Cash out Refinance

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What is a purchase money mortgage? the simplest definition describes purchase money mortgage as a home loan used to buy a property

Cash out

current rates

As of Feb 11, 2016

Rate
APR

 

conv. 30 year fixed

3.50%
3.625%

 

conv. 20 year fixed

3.375%
3.50%

 

conv. 15 year fixed

2.75%
2.875%

 

conv. 10 year fixed

2.50%
2.60%

 

FHA 30 year fixed

3.00%
4.290%

Welcome to AMA Mortgage

Mortgage Process
In the United States mortgage loans are issued by both banks and non-bank loan companies. These companies make money primarily by charging the consumer a rate of interest on the total outstanding amount of the loan. They also charge application fees that can range from a few hundred dollars to several thousand. Finally, a lender may require a borrower to pay points before issuing a mortgage. A point is equal to 1% of the total loan amount.

Fico Score Ranges and Interest Rates
Mortgage loans are typically much larger than most other types of personal loans. As a result, the screening process to determine borrowers’ eligibility is more rigorous, at least in theory. Banks try to make loans, to borrowers who have high likelihood of paying back the loan, or at the very least try to price the loan at an APR that is high enough to account for any additional risk that they would be taking on by lending to unqualified buyers. Banks judge potential borrowers based on several criteria.

Credit Scores – The FICO score is a measure of a borrower's credit worthiness --the likelihood that he or she will pay back his or her loan. Consumers with higher FICO scores are considered to be less risky by lenders. The FICO score is derived from a formula that was created in the 1950s by Fair Isaac and Company as a way to help lenders to more accurately and more consistently measure the credit risk associated with borrowers. The formula takes into account factors like number and regency of late payments, total debt and length of credit history. This formula was then adopted by the three major credit bureaus- Equifax, Transunion and Experian - which collect information from thousands of lending institutions throughout the U.S. in order to calculate a comprehensive score for each borrower.

Income – When considering borrowers for loans banks and other mortgage companies look at the borrowers income. The pay particularly close attention to the borrower's front end ratio - the amount of pre-tax income spent on housing expenses (includes mortgage or rent, property taxes, etc.) and the back end ratio, the amount of money spent all debt, including credit cards, loans, mortgages, etc. The front end ratio should be no more than 45% where as the back end ratio should not exceed 55%.This of course is easier said than done. According to the last U.S. Census more than half of Americans live in states where the average amount of gross income spent on housing exceeds this 35% threshold. [4] [5] Size of down payment and loan to value (LTV) As part of the loan process the borrower has to get an appraisal on the house or condo that he or she wishes to buy. Based on a serious of inputs – sales values for comparable properties in the same neighborhood and condition of the property) the appraiser comes up with an approximate value for the property. Most banks will not lend a borrower more than the appraised value of the property. In fact most banks prefer to lend significantly less. The size of the loan relative to the value of the property is known as the loan to value. For instance an 80,000 mortgage on a 100,000 property represents an LTV of 80%.

The ability of a borrower to get a loan from a bank and the interest rate he or she pays for that loan depend partly on the size of his or her down payment. A higher down payment means a lower loan to value. The more money the borrower puts down, the more likely he is to be approved and the more likely he is to get a lower interest rate. A minimum down payment of 20% is standard, although in recent years loans with 3.5% money down have been made available to borrowers.

Conforming vs. Non-conforming Mortgages
In the United States Fannie Mae and Freddie Mac, both of which are government sponsored entities, purchase home loans from banks and other mortgage lenders. This is a critical to the health of the financial markets, because it means that mortgage lenders do not need to wait 15-30 years to receive full payment for their loans. Instead they sell to Fannie and Freddie and then are free to use the proceeds of the sell to make new loans. This also reduces the risk to the bank of loan defaults, because the bank doesn’t have to hold the loans for long. If a loan issued meets the criteria that Fannie and Freddie set, then it is classified as conforming. Otherwise it is non-conforming. There are several reasons that loan might fail to conform:

Loan size- Jumbo loans or loans that exceed the caps established by Fannie and Freddie are not eligible for purchase. These limits were 417,000 for a single family house and 533,000 for a two family house are considered high income and have higher caps. Hi balance loan starts from $417,001 to up to $728,000 as allowed by your county you buying house.

Size of down payment- Fannie and Freddie typically require that the LTV not exceed 80% of the appraised value. In cases where LTV exceeds 80%, the borrower must purchase private mortgage insurance or lender paid mortgage insurance can be obtain with small rate increased if you have higher score. One can obtain lender paid mortgage insurance up to 95% LTV.

amamortgage.com Blog

Super User . 24 July 2014
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