Home Builders Association of Greater Cincinnati

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Financing Your New Home

Quick tips when shopping for a mortgage: (top)

  • Don't judge a mortgage solely by interest rates. Understand points and other loan fees lenders may assess.
  • Interest rates can vary based on your credit score. The better your credit, the better the interest rate you will typically be offered.
  • Ask your lender or mortgage broker for itemized lists of loan fees for services such as appraisals and credit reports.
  • Check to see if the interest rate being offered to you is current. Rates can change daily, so find out if the rate you're quoted is the lowest for the day or for the week.
  • Avoid mortgages that have prepayment penalties.

There are many lenders out there and many types of loans. When looking for a loan, be sure to shop around to find a mortgage banker whom you can trust, and someone with whom you feel comfortable. Reputable lenders will be able to answer questions for you such as:

Can I get a Good Faith Estimate? (top)

Good Faith Estimates are required by law. This estimate will give you an idea of all of the costs the lender will charge you. While these are not necessarily firm quotes, they do provide a good estimate of what your fees will be.

What are all of the costs I can expect to pay? (top)

This should include any appraisal fees, your credit report, recording fees, taxes, deed preparation and anything else you will be responsible for paying at closing.

Do you offer rate locks? (top)

Building a new home takes time. Rates can fluctuate substantially in the months it takes to build your new home. It may be beneficial to you to lock-in an interest rate a month or two prior to when your home is scheduled to be completed. Ask your lender if they can lock-in an interest rate, how much that rate lock will cost you, and for how long the interest rate will be locked in.

Which loan is best for me? (top)

Don't be afraid to ask your lender the differences between loans:


Fixed Rate loans
For those of you who like to know exactly what your house payment will be every month, you may want to consider a fixed-rate mortgage.

Advantages of a fixed-rate mortgage:

  • You want to know exactly what your monthly payment will be for life of loan
  • You believe interest rates could rise in the next few years
  • You plan to own your home for many years to come


Adjustable Rate loans
You could save with a lower adjustable-rate mortgage. Adjustable-rate mortgages offer lower rates for an initial payment period (typically 1, 3, 5, 7 or 10 years). ARMs can be a good choice for people in certain situations, such as rising income expectations or short-term ownership. After the initial lock-in period, mortgage payment rate and loan payments vary. Because interest rates and payments can and probably will increase, home buyers considering this type of mortgage should be prepared financially for a possible increase in rate and/or payments.

Why choose an adjustable-rate mortgage?

    • Lower initial monthly payments than a fixed-rate mortgage
    • May be advantageous if you plan to own your home for 10 years or less
    • If you believe interest rates will be better than current rates when your ARM adjusts

 


Interest Only loans
Interest-only loans have an initial period of time when you pay only interest. This is followed by a period of time when your payment goes up in order to pay down the loan's balance. This is different than traditional mortgages, where the payment consists of principal and interest for the life of the loan.

Why choose an interest-only mortgage?

    • If your income fluctuates (self-employed, commissioned or on a bonus schedule), you can choose to make larger payments toward the principal when it is convenient
    • You have other needs for your cash each month and want the most flexible cash flow options
    • You expect to own your home for a short period of time and you believe you will make money on the resale of your home


Government Loans
FHA loans are ideal for many first time homebuyers. This program is under the U.S. Department of Housing and Urban Development. Please click here for HUD's website and more information on FHA loans.

Why choose an FHA loan?

    • If you have less than 20% down payment on your home, the mortgage insurance is cheaper on an FHA loan than on a conventional loan
    • FHA typically offers very attractive rates
    • Criteria for credit scores & underwriting are less stringent on an FHA loan
    • Down payment requirements are typically less than on a conventional loan

VA Loans are ideal for veterans. This program falls under the U.S. Department of Veterans Affairs. Please click here for more information on VA loans.

Why choose a VA loan?

    • many loans have relaxed qualifying requirements
    • lower monthly mortgage insurance than conventional loans
    • Zero down payment options
    • VA loans typically have attractive rates

 

 Other Resources (top)

Federal Housing Administration

Veterans Administration

Mortgage Bankers Association Consumer Resources

Search for an HBA member lender

 

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