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Phone: 979-693-0201 Email: [email protected]

Myke Leatham | Brazos County Realty

Myke Leatham | Brazos County Realty

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What Are the Different Types of Mortgages Available?

May 20, 2020 by Myke Leatham

Are you ready to dive into homeownership this year? Are you asking yourself what are the different types of mortgages available? It’s helpful to understand some of the most common types of mortgages available, as well as some unique options so you can be prepared when you meet with your lender. 

Interest-Only

Interest only payments mean that you are not paying off the principal on your property. These types of mortgages are popular among first time homebuyers because it allows them to pay a lower monthly payment for the first few years of ownership. This type of loan does not restrict the owner to only paying interest, if you choose to you can also pay more every month so that extra money goes towards your principal.  

Fixed Rate (Conventional) 

A fixed rate loan is the most common type of conventional loan – this option provides the homeowner with a single interest rate and monthly payment for the entire term of the loan, which is typically 15 or 30 years. This type of loan is ideal for the buyer who is looking to plant roots and doesn’t want to be surprised by fluctuating payments. This loan type is very easy to understand, and many buyers appreciate it because they don’t have to worry about their monthly payments changing at any point in time, unless they choose to refinance. The biggest benefit of a fixed rate mortgage is that even if interest rates go up, your payment will not change. 

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage (ARM) offers interest rates that are usually lower than what you would get on a fixed rate mortgage for a specific period of time. For example, the first ten years will have one interest rate and for the remainder of the loan it will adjust once a year in accordance with what current interest rates are. This means that if interest rates skyrocket so will your monthly payments, and if they drop then your payments will also be lower. This type of loan is best for the home buyer who is purchasing a starter home with the intention of moving on within a few years, or someone whose lifestyle involves constant moving around. There are different options for how long the fixed rate period will last in an adjustable rate mortgage – it could be fixed for five years, seven years, ten years or other options depending on what the bank or lender can offer. This means that your rate is fixed for that amount of time and then it will adjust once a year for the remainder of the loan. Adjustable rate mortgages typically carry a 30-year term. 

FHA 

An FHA loan is a mortgage that is insured by the Federal Housing Administration, and this is one of the most popular low-down payment loans available to buyers. Buyers love this option because it allows them to purchase a home with as little as 3.5 percent down. FHA loans also make it possible to qualify for a mortgage with lower credit and higher debt than some other programs. These types of loans are typically reserved for low income buyers or first-time home buyers, but you don’t have to be a first-time home buyer to be able to use one – many lenders are authorized to issue FHA loans to other borrowers. To qualify for an FHA loan, you will need to meet these requirements:

  • If your credit score is 580 or higher, you will need to put down at least 3.5 percent
  • If your credit score is between 500-579, you will need to put down at least ten percent
  • A debt-to-income ratio of 50% or less
  • Steady employment and income
  • You must live in the home and use it as a primary residence
  • You have not had a foreclosure on your record within the last three years

These eligibility requirements are a lot more lenient than other mortgages, which means that it provides a wider selection of individuals the opportunity to fulfill their dreams of becoming homeowners. 

Veteran (VA)

A VA, or Veteran Affairs loan, is a type of loan that is available to individuals who have served in the United States military. If you qualify for a VA loan, then you can become a homeowner of an incredible property with no down payment and no mortgage insurance requirements. This type of loan is backed by the U.S. Department of Veterans Affairs and there are certain eligibility requirements you have to meet, including:

  • You are currently active duty military, or you are a veteran who has been honorably discharged
  • You completed at least 90 consecutive days of active service during wartime, or at least 181 consecutive days of active service during peacetime
  • You have more than six years of service in the National Guard or Selective Reserve

You may also be able to qualify for this type of loan if you have a spouse who died in the line of duty. In order to go through the process of qualifying for a VA loan you will need to receive a Certificate of Eligibility and then fill out paperwork to determine how much you will be able to borrow. While every lender has their own set of criteria for underwriting and approving borrowers for a loan, those who are applying for a VA loan typically have less strict requirements to fulfill aside from those for eligibility. Borrowers will need to show that they have the income necessary to make their mortgage payments, they shouldn’t have a massive amount of debt and while there is no minimum credit score requirement it would be difficult to get approved with a FICO score that is lower than 620. 

Balloon

This type of loan has some significant pros and a very big downside to take into consideration. A balloon loan is any type of financing that includes a lump sum payment that is due at any point during its term – this usually happens at the end of the loan. A balloon mortgage can be interest-only, which means you will owe the entire balance of the loan at the end of the term, or you can choose to pay interest and principal so that the lump sum payment is smaller at the end. One of the main benefits of a balloon mortgage is that your monthly payments will be lower, which can be a big incentive for many people to become homeowners. The downside of this option is that it is a higher risk loan for both the buyer and lender, the rates are not as favorable as they are on traditional loans and it may be difficult to refinance if you choose to. 

Jumbo

A jumbo loan is in reference to a mortgage that is too big for the federal government to guarantee. The current limit is around $500,000, which means that a borrower would not be able to qualify for lower interest rates that are available on smaller loans. This type of loan is also known as a non-conforming conventional mortgage, but they are considered riskier for lenders since they won’t be protected from a loss if the borrower defaults on their payments. The underwriting guidelines for jumbo loans are very strict – borrowers must have the following to qualify:

  • A credit score higher than 700
  • A low debt-to-income ratio, unless the borrower has plenty of cash reserves
  • Savings in the bank – some lenders will require borrowers to have at least a year’s worth of mortgage payments saved to qualify
  • Additional documentation
  • Some lenders may require more than one appraisal
  • A higher down payment – at least 20%

Bridge

A bridge loan is known as “gap financing,” and it’s something that many homeowners utilize if they are trying to buy a new home before selling their current property. This type of loan is secured by your existing home and it “bridges the gap” between the sales price of a new home and the new mortgage. What happens is that essentially you end up borrowing your down payment on a new property before your current property has sold. The benefits of using this type of loan include:

  • It allows a homeowner to buy a new home without stressing out about selling their current property. 
  • Some bridge loans might not require monthly payments for a few months, and they offer flexible payment options. 

Some of the drawbacks of a bridge loan include:

  • A bridge loan is typically more expensive than a traditional home equity loan.
  • The borrower must be able to qualify to own two homes at the same time. 
  • It’s stressful keeping track of and maintaining two mortgages at one time in addition to the interest from the bridge loan. 

Qualifying for a bridge loan doesn’t follow specific guidelines and requirements, most lenders will follow an approach of “does it make sense?” 

If you’re ready to pull the trigger on homeownership contact us today – we’ll help you navigate the entire process from start to finish – including helping you secure the best mortgage option available.

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Category: Blog

About Myke Leatham

I’m so glad you found me – your College Station and Bryan, TX real estate source! When you choose to buy or sell a home in College Station/Bryan, TX or other surrounding areas using our expert services, you will receive a free consultation to determine your needs, free listings, and free reports sent to you by email. These weekly reports will show you how hard the members of my team are working to accomplish your property goals, and we guarantee the best service and consultation you have ever experienced. You’ll find the best community information for the College Station, Texas region right here.

It’s nice to know YOUR Realtor will still be of service after the sale.

Experience Counts: Broker/Owner of Brazos County Realty
Over 25 years of sales experience. With past ABR, GRI, CRS, & Epro designations.
Continuing education in real estate: Education is paramount in an ever changing industry like Real Estate. Myke has taken over 1000 hours of real estate specific courses which include but are not limited to: Residential Appraisal, Marketing, Law Contracts I & II, Finance, Residential Inspections, Principles and Practice, Law of Agency, Code of Ethics, Bankruptcy/Easements/Surveys/and Probate, Home Warranties, 1031 Exchanges and hundreds of hours of extensive real estate training.

Reputation: SALES LEADER since 1998; Top Producer 2000 through 2009. Listed among the top agents in the county. Consistently ranked among top realtors for total sales volume out of 900 realtors for commercial and residential real estate in the Bryan/College Station, TX area. When Myke represents buyers, she presents all viable options to her clients, including those properties that are not officially listed, but could be available for sale based on her inside information. Her expertise lies with investors and marketing homes of all price ranges in College Station/Bryan to local, national and global buyers, across all major media channels and through her extensive, personal network of contacts.

Myke is among the top 1% of all Realtors in North America!
She has earned the Designations of ABR (Accredited Buyers Representative), CRS(Certified Residential Specialist), GRI (Graduate of Realtors Institute)CHMS (Certified Home Marketing Specialist), and E-pro (Certified Internet Professional)
Fewer than 3% of all Realtors nationwide earn these certifications. They are not only a symbol of Myke’s commitment to this business, but these designations are your assurance of a skilled, trained real estate professional.

Myke is a consummate real estate professional who not only understands the art of deal-making, but also the art of relationships. She makes the process of buying and selling homes an uplifting and fun experience. She has a tremendous appreciation for Bryan and College Station, its rich history, and Texas A&M traditions having lived in the area for 25 years. Her knowledge of Bryan/College Station’s real estate market and market trends is unparalleled. Having been personally involved with clients through their remodeling, purchasing and selling processes, she knows intrinsic quality and value when she sees it. When she doesn’t see it she lets her clients know, without hesitation.
Myke’s proven track record and affiliations in the field of real estate demonstrates her high level of professionalism.

* High energy and enthusiasm
* Aggressive marketing
* Expert negotiating skills
* Ability to listen and ascertain customer’s desires and needs
* Fun to be with
* Internet savvy
* Because Myke is an experienced investor, she quickly helps her customers locate and define good business opportunities. No one likes the feeling of being ‘sold to’ so Myke provides as much information as possible to help you make the right decision.

Personal Commitment:
I am prepared to go the ‘Extra Mile’ for you, because I understand the financial and emotional significance of purchasing and selling your home. I will carefully listen to your desires and arrive at a workable plan. I believe sensitivity, listening, and service are important keys to success.
Whether you are buying or selling a home or you are just curious about your home’s market value, I’d be happy to provide my market expertise and intelectual property without obligation, or meet with you to evaluate your home for future reference. I want my customers to have a great time and enjoy the total process of purchasing or selling property. It gives me great pride when my customerspass my name on to their friends and family. I will continue to work hard to make sure critical information is available at www.AggieRealEstate.com and I invite all interested investors to search my site for cash flow opportunities. I will dedicate my time and talents to helping you achieve your goals. It is my goal to make your buying and selling experience extraordinary. Look closely and you’ll see how much I love meeting and working with people. You’ll experience the difference in working with an experienced and dedicated professional.

Personal information:
Michelle goes by ‘Myke’ and is the proud mother of 6 children – 3 girls and 3 boys. Her husband is David Leatham. They met at Brigham Young University. They have been married since 1977. David is a finance professor, and Associate Head over graduate studies in the Agricultural Economics Department at Texas A&M University, and speaks fluent Spanish. They have lived in College Station since 1983 and loved every minute of it. Myke loves to quilt, sing, swim, ‘sing’, bake bread, ‘sing,’ garden, ‘sing’, sell real estate, and ‘sing some more’ :-). Family, church, and real estate consume most of her time. Truth, honor, integrity, kindness, loyalty, gratitude, and service are very important words to her.

Slogan: ‘Let Myke Help You With Your HOMEwork!’

Referrals: The highest compliment I can get is when you pass my name on to others or post a kind remark on the internet. When you send your friends and family my way, I’ll always provide them with the highest quality of service that I know you would appreciate. Thanks in advance for all your support and friendship.

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