Refinancing Your Home
Homeowners refinance for different reasons, but the process of refinancing a mortgage should result in some benefit to the homeowner. A borrower may choose to refinance to obtain a lower interest rate and a lower monthly payment, or change the type of loan that they have.
Borrowers who started with a high-interest loan may reap the rewards of an improved credit standing by refinancing. Some homeowners refinance to ‘cash out’ and take advantage of the equity they have earned, while others may choose to refinance to shorten their loan term and build equity more quickly.
Regardless of the reason for refinancing, your Alpha Mortgage loan officer will need to know what the existing loan scenario entails. He/she will review the homeowner’s long-term goals and provide a comprehensive spreadsheet that outlines various loan programs that will provide noteworthy benefits to the homeowner.
Understanding Rate Shopping
Shopping for the best interest rate possible has always been the consumer’s primary objective when borrowing money. As well it should be! The challenge with this strategy is that there is much misleading information released on the subject by various media. Internet web sites and email marketing, along with other media such as radio, television and billboard advertising, have brought the importance of interest rates to the forefront of consumers’ minds.
The problem for the consumer with this type of marketing is that it is designed to make the lender’s phone ring. Often, the advertiser offers a ridiculously low interest rate, with the intent of using a “bait-and-switch” technique once the client is reeled in. This is often done through short pricing. Short pricing is a term that is used when a lender offers an extremely attractive interest rate, but that rate is only locked-in for a very brief period of time.
The average consumer enters into a purchase contract to buy a home for at least 30 days. Pricing on an interest rate locked in for a 7-day period is of no use to most prospective home buyers. It simply isn’t enough time to complete the transaction. While the billboard advertising or Internet banner ad may boast a terrific rate, the lock-in period is often not realistic in terms of providing enough time to negotiate a purchase contract and close the deal. Be very careful when shopping for interest rates. Make sure that when you are quoted a rate, you are asking the broker what the lock duration is. Make sure that lock period allows you enough time to complete your purchase transaction.
Another common marketing ploy that makes interest rates appear attractive is geared around the manner in which fees are presented. All lenders are required by law to state the real cost of the financing through the Annual Percentage Rate (APR) each time an interest rate is quoted in advertising. APR takes many of the fees associated with the loan into consideration, and it is usually listed in fine print as a disclaimer.
Advertisers often list a low interest rate in large bold type, but the higher APR indicates in fine print that several points are being charged to get that rate.
The consumer must take into consideration that the interest rate is not the only important factor in obtaining financing. Another equally important question to answer is, “How long do you need to borrow this money?”
The length of time you need to borrow the money has a profound impact on whether or not you should be paying upfront fees (points), and likewise has bearing on your loan program selection.
Statistically, homeowners move every 7 to 10 years. One of the common mistakes made by home buyers is automatically selecting a 30-year fixed rate loan program for financing instead of evaluating other options. The chance of needing the financing for 30 years is actually slim-to-none. If the buyer is somewhat transient in their job or is planning a family in the near future, the home may not really meet their long-term needs.
Buyers are often solicited with programs that are contingent upon 30-year financing. The interest rates that are offered, regardless of how low they might be, are often irrelevant as rates are dependent upon several factors, including down payment and credit score.
If a buyer has at least 5% for a down payment, an interest rate that is fixed for three, five or seven years may be a much more realistic option. This allows the buyer to capitalize on a low introductory rate and save a significant amount of money, which can then go toward the down payment on their next home. It is of utmost importance to work with an experienced loan consultant that understands some of the practical aspects of financial planning. A well-versed consultant will ask you many questions about your short and long-term goals, and assist you in choosing a loan program that is truly suited to those goals.
Conforming Home Loans
What exactly are conforming loans? As the name suggests, conforming loans are mortgages that conform to the loan limits set in place by Fannie Mae and Freddie Mac. Any mortgage that falls within these limits is considered a conforming loan, while loans that exceed the limits are considered non-conforming, or jumbo loans.
Loan limits can vary by location as well as the number of units within the structure. For example, a single-family home with just one unit will have a lower loan limit than a duplex with 2 separate units. Loan limits are also subject to change. If you’re not sure about the loan limits in your area, speak with a mortgage professional or check with Freddie Mac or Fannie Mae online; both organizations post current loan limits on their websites.
If you’d like to learn more about our conforming loan programs and find out if you qualify, please reach out to us for a free consultation.
Why Consider a Conventional Mortgage?
- Conforming loans can be used to finance just about any type of property, from condos to houses to modular homes and more.
- They can also be used to refinance existing mortgages.
- Conforming loans typically carry lower rates than non-conforming loans.
- Rates may be more competitive than USDA, FHA, or other government back options.
- Multiple fixed rate options.
- Adjustable rate solutions may also be available for qualifying individuals.
We are pleased to offer competitive rates and flexible terms on FHA Loans, one of the most popular types of home financing in today’s marketplace. With a low minimum down payment, lenient credit requirements and a variety of uses, the FHA Loan program may be ideal for first time buyers, buyers with less-than-perfect credit or buyers without a lot of cash saved for a down payment.
FHA Loans are insured by the Federal Housing Administration (FHA) and offered only through FHA-approved mortgage lenders. We are proud to be among those approved to offer this affordable financing opportunity. FHA mortgages are one of the most popular home financing options today, largely due to their low money down requirements. With an FHA Loan, the borrower can put down as little as 3.5%.
Additionally, FHA loan borrowers may be able to secure a lower interest rate, even if their credit score is lower, making the FHA loan attractive to people with less-than-perfect credit histories or those who have not established significant credit.
Put simply, borrowers who may not qualify for the best terms through conventional loans may be able to do so through the FHA program. If you’re curious about FHA home financing and whether or not it makes sense for you, compare rates and terms with one of our loan specialists today.
Why consider an FHA loan?
- 3.5% minimum down payment
- Annual mortgage insurance premium may be financed into the loan*
- Available in a variety of terms, including 30 year fixed rate
- Can be used to finance the purchase of a home along with certain repairs – ideal for those buying a fixer-upper (203K rehab loans)
- May be ideal for first-time buyers
- May be ideal for lower credit buyers
- It can be used to refinance as well; those with existing FHA Loans may be able to take advantage of FHA Streamline Refinancing. Speak with one of our loan professionals for details.
*Single, upfront mortgage insurance premium required, along with annual premium. Talk to our loan professionals for more information.
USDA Financing Solutions
We offer competitive pricing on $0 down USDA Rural Housing Loans, a type of home financing program that helps low- to moderate-income borrowers achieve homeownership while simultaneously fostering development in less-populated communities. These government-backed loans feature up to 100% financing with no monthly mortgage insurance premium, making them one of the more affordable home loan options in today’s marketplace.
Backed by the United States Department of Agriculture (USDA), the USDA Rural Housing Loan is available to borrowers who meet certain income requirements. Geared toward low- or moderate-income households, it is possible to earn too much to qualify for this loan. However, if you do qualify based on your income, credit score and other factors, you can use a USDA home loan to buy a home with up to 100% LTV—in other words, no down payment necessary.
Another important aspect of the USDA Rural Housing Loan is that the property being financed must be located in a USDA-eligible area. Since one of the program’s goals is to help increase homeownership in less developed parts of the country, USDA financing is only available to homes in certain USDA-approved zones. If you already have a home in mind, you can check to see if it is eligible for USDA financing by looking it up on the USDA Property Eligibility Map on the USDA’s official website.
Why Consider a USDA Mortgage?
- 100% financing available.
- A single, upfront mortgage insurance premium required, which can be financed into the loan itself; no monthly mortgage insurance premium.
- 30 year, fixed rate terms. This ensures lower, predictable payments and a rate that will never increase.
- Also available for refinancing; borrowers with existing USDA loans may take advantage of USDA Streamline Refinancing. Speak with one of our loan professionals for details.
VA Loan Financing (IRRRL)
Alpha Mortgage Advantage is proud to offer competitive rates on zero money down VA loans for qualified military and veteran borrowers. With the VA mortgage program, active duty military, veterans and some surviving spouses of veterans can achieve their dreams of homeownership without needing a down payment and without the burden of paying additional PMI fees.
The brave men and women of the United States Military make significant sacrifices in order to protect our country. For this reason, we are honored to help them find an affordable path to the American Dream of owning a home through the VA loan program. Reach out to our team today to learn more about the program and receive a free rate quote.
Backed by the United States Department of Veteran Affairs, the VA loan program allows eligible active duty and veteran borrowers to obtain affordable home financing with zero money down required. Additionally, VA loans do not require private mortgage insurance, aka PMI, which makes this one of the most affordable mortgage programs in today’s marketplace. While VA loan borrowers are required to pay a one-time funding fee to help keep the VA loan program going, this can be financed into the overall mortgage, allowing borrowers to save even more on their out-of-pocket closing costs.
Why Consider a VA Mortgage?
- Up to 100% financing available, i.e. no minimum down payment
- No PMI
- VA Loans can be assumable (when the VA borrower sells their home, the new owners may be able to assume the terms of the VA loan, even if they are non-veterans/non-military). This can be an attractive selling point when it comes time to put your home on the market.
- The one-time funding fee can be financed into the loan.
- Insured by the federal government, which can mean lower risk for lenders and lower interest rates for borrowers.
Most popular option. Majority of programs require 5%-20% down payment. Private mortgage insurance may be needed with less than 20% equity.
Low down payment financing solution. Popular with first time home buyers but may be used by repeat buyers. Also popular cash-out refinancing option.
Zero down financing program for lower and middle income borrowers looking to purchase property in approved USDA eligible areas.
No money down mortgage programs available to qualifying members of the US Armed Forces, military veterans and surviving spouses.
The Reverse Mortgage Division works with homeowners and home buyers age 62 and older in the States of North Carolina and South Carolina.
Fixed-rate and adjustable-rate financing solutions for borrowers with loan amounts exceeding today’s conforming loan limits which can vary.
Option for borrowers looking to finance the costs of eligible home improvements into their loan amount, an alternative to a home equity loan.
We work with real estate investors throughout the Carolinas to achieve their rental property financing goals. 1-4 units properties only.