Sources For Your Down Payment
The obvious source of money for your down
payment is either your savings or the proceeds
from the sale of a home you already own. But
there are some other not so obvious sources. In
recent years, for example "parent power" has
taken some new twists for first-time buyers.
Home Equity Loan.
Parents often have considerable equity built up
in their own homes—and many are tapping that
asset through home equity loans to make a gift
to their children. Ask your tax advisor for
current information. Often lenders will require
a "gift letter" to verify that parents don't
If you have built up a cash value on your life
insurance policy over the years, you may be able
to borrow from your insurance company up to the
amount of this accumulated cash value. Often,
they will even ask a more favorable interest
rate than would be asked for other types of
Stocks and Bonds.
If you feel the market doesn't favor selling
your stocks or bonds now, you may be able to
secure a bank loan using your portfolio as
Company Profit Sharing
or Savings Plan. Look into the possibility of
withdrawing what you have in your profit sharing
or savings plan account or borrowing against it,
if your company has these programs.
Mortgage Insurance Can Reduce Down Payment
If you obtain a conventional loan, you may make
a down payment of 20% or less. Through the
lender, you will be required to buy private
mortgage insurance (PMI). This insurance
provides protection for the lender in case of
default, allowing the lender to approve a larger
Mortgage insurance offers a variety of payment
options. You may make an initial payment at
closing and monthly payments with the house
payment. You may make only an initial payment or
only monthly payments. You may even increase
your interest rate and have the lender pay the
insurance. Be sure to ask your lender for a
comparison of the benefits of each of these
The larger the down payment, the less money you
need to borrow. This means a lower monthly
payment. However, remember that in addition to
your down payment and monthly payments, you will
need money to pay for closing costs, moving,
appliances, household setup, a reserve for
family emergencies, and other miscellaneous
items. So don't plan to put your last penny down
on the closing table.
What To Look For
Choosing a place to live can be one of the most exhilarating experiences of a lifetime. We've learned through the hundreds of home seekers we have helped that the best approach is to be prepared. Literally, to do some homework. Our observation is simple. Your move can be an improvement if you duplicate what you like in your present community and avoid what you dislike.
House Hunting Begins At Home
The search can begin in your present home so we've developed some questions to stimulate your thinking and help you identify your needs and preferences. Once you've clarified what you like in your present community, you will have a better idea of what you want to find. Plus, you will be able to express your preferences clearly to your Stewart Real Estate Associate who can help you find it.
One hint to keep in mind as you go house hunting is an old wisdom: "The best time to think about selling your home is when you're buying it." In other words, what appeals to you as a buyer today will probably also appeal (or what turns you off will be a turn off) to buyers tomorrow. A careful house hunter will benefit years from now when it's time to sell to an equally value-conscious buyer. Build your buyer savvy by viewing the Stewart Real Estate Website, reading newspaper classified ads, homes-for-sale magazines, and visiting open houses.
County and City Questions
Would you characterize your present area as urban, suburban, semi-rural, or rural? Is the population density low, medium, or high? Is the population decreasing, stable, or increasing?
What natural features are the most significant? Woods? Hills? Flat land? River? Ocean shore? Man-made lakes? Streams and ponds?
How do you commute to work?
Do you walk? Drive? Car pool? Taxi? Bus? Train? How far must you travel and how long does it take morning and evening? Do you use available public transportation for local trips or to visit close-by communities? Can someone reach your home on public transportation?
Where do you do your shopping?
Central commercial districts? Shopping malls? Supermarket shopping clusters? Community shops or home delivery? Imagine a list of typical stops in one week . . . how many miles and how much time would visiting the entire list require. Do you want greater convenience?
What types of schools does your family attend now?
From grade school to graduate school, and from day care needs to special vocational training, what facilities will you require in the next few years? Are there any special needs or plans? Although it's extremely difficult to compare quality of education, especially when the most important ingredient is the relationship between teacher and student, some statistical indicators can be helpful. Average class size at grade level. Comparative standardized text scores. Average salary of teachers. Percentage of high school graduates who go to college.
What does the area offer for recreation and entertainment? Music? Movies and live stage? Sports arenas? Museums? Nightlife? What types of indoor and outdoor sports facilities are available? Are there public parks, country clubs, athletic clubs, fraternal groups? Do you require any special facilities?
Choosing A Neighborhood
After you take stock of the larger view of the county and city, this section helps you zero in on your neighborhood preferences. In real estate, an old maxim says there are three criteria that determine market value: "location, location, and location".
The concept of neighborhood isn't as precise as county or city. Some people consider the boundaries to be the district around a grade school. Others consider it "walking distance", more or less within a half-mile radius. Wherever you draw the line, a neighborhood is the immediate area around your house.
Every neighborhood can be described from three standpoints: its people (your future neighbors), what it looks like, and where its services are located. Yet any neighborhood description is highly subjective, which brings up another observation from our experience.
No matter how much hard data one gathers about a neighborhood, nothing compares with information that local people provide. Whether it's fellow workers, letter carriers, or people at a bus stop . . . neighbors are the best observers of a neighborhood. Talk to as many people as you can, and ask them the following questions:
Do neighbors socialize regularly, or hold block parties, picnics, holiday parties, organize sports teams? What are the ways they have met their neighbors? Walking a dog, commuting, PTA, parties, little league, gardening?
What types of dwellings:
high-rise or low-rise apartments, condominiums, multi-family structures, single-family houses, mobile homes? How much do the neighbors care for lawns and gardens? Are the houses maintained "like new", adequately, poorly? Is there a Homeowners Association?
Are cars parked mostly in garages, driveways, in the street? How old are the houses? More than 30 years old? 15 to 30 years? New? How far apart are the houses? Are property upgrades common? Swimming pools, tennis courts, fences, walls, patios, extensive landscaping?
For convenience, how does the neighborhood rate? Can you walk to shopping or is a car necessary? List your five most frequent destinations. Are they clustered in one stop-and-shop location? Two stops? How much time is required for fire, police, or ambulance services to arrive in an emergency? How close are cultural centers, parks, restaurants, theaters, playgrounds?
How do the children routinely reach their schools, play areas, friends' homes? By walking, bicycle, bus, or do parents drive them? Is public transportation available for commuting or shopping? Do any local ordinances affect pets, parking, lawn, etc.?
What are the disadvantages of the neighborhood? Freeway, railroad, or airplane noise? Factory pollution, heavy traffic, exposure to heavy storms, possible flooding?
Area House Styles
The metropolitan area is known for its variety of housing. This section is designed to introduce some of the basic styles most frequently found in the area. Numerous variations and other unique styles not mentioned here are also available.
A symmetrical peaked roof often with dormer windows which creates a one-and-a-half story design with living space upstairs in an "expansion attic".
Colonial. A two-story design with center hall or side entry, often with basement. Variations often feature double or single wings with garage. Numerous styles include New England, Federal, Plantation, Dutch Colonial, Georgian, French Colonial.
Contemporary. Modern and non-traditional creation of living spaces using a spectrum of shapes, materials, and designs. An "open" use of space is characteristic. May be single or multiple stories.
Hi-Rise Condominium. Multi-story building with elevator access to owned apartments; monthly fee usually pays for use of recreation facilities, maintenance and utilities.
Low-Rise Condominium. A cluster of attached units, four stories or less ranging from converted garden apartments to ramblers and two-story townhouses. Resident owns title to living space while jointly owning public areas; condominium fee often covers maintenance, amenities, sometimes water; other utilities may be individually billed.
Rambler. A single-story house with all living areas on same level. Variations include L-shape or U-shape plan, perhaps with basement. Sometimes called "ranch"; if it is small, a "bungalow" or "cottage".
Split Foyer. Entry is between floors. Makes use of slope by placing basement partially above ground level on uphill side, thus basement becomes livable space. Also called "split entry".
Split Level. Side wing has two levels off main ground floor; designed for maximum living space while occupying the least land. Garage and sub-basement are frequent options.
Townhouse. A row of two-or-three-story dwellings sharing common walls, also called "row houses". Wide range of styles from contemporary to colonial. The term "semi-detached" describes a pair of townhouse end units; similar in function to a duplex.
Choosing A House
We've saved the best for last. In many ways, finding a home is easier than choosing a county and a neighborhood, because you are considering tangible details. Yet our experience suggests that many people "decide" with emotion and "justify" with facts. This section will help you find a better balance.
First, one should realize that thousands of houses are sold in the area every year. Inspecting the thousands of houses on the market is obviously impossible. But you can turn this overwhelming selection to your advantage. If you can clearly describe the features you require, your Stewart Real Estate Sales Associate can make a preliminary screening for you. After you select the best houses, you can concentrate on inspecting your top choices. The key is knowing what you need.
How many people will be living in the house? Do you prefer a new or resale home? What is your preferred housing style? Townhouse, colonial, contemporary, split level, split foyer, Cape Cod, rambler, or something else?
How many total rooms do you need? Bedrooms, bathrooms? How strongly do you require features such as: separate living room, dining room, laundry room, basement or attic, family room, fireplace, workshop area, garage? How much property do you require? Do you have preferences for any particular natural features?
House Hunting Many of our customers find it helpful to keep a record of the houses they inspect. A notebook is handy with pages large enough to record vital information, as well as hold stapled pictures of attractive houses and neighborhoods or clipped advertisements.
Is the asking price comparable to other houses in the neighborhood? Higher or lower? However, when carefully comparing properties, be sure to take into account unique features and improvements that vary house-to-house, and consult your Stewart Real Estate Sales Associate who can provide a Comparative Market Analysis (CMA).
Is the existing mortgage assumable? Required down payment amount? What financing method is acceptable to the seller?
What are the annual property taxes? Will the taxes increase with the transfer of deed and a new market price? Any local bonds or assessments?
Physical Details Outside.
Address of property? House style? Lot size? Landscaping details? Degree of grounds maintenance required? Age of house? Structural condition? Are any major repairs or improvements necessary? Maintenance of building?
Inside. Make a sketch of floor plans. Total number of rooms and baths on each floor? Any extras such as intercom, fireplaces, phone jacks? Built-in appliances: dishwasher, garbage disposal, trash compactor? Adequate storage space?
Construction. Inspect quality of materials, present condition, craftsmanship both inside and outside. Insulation? Weather stripping or storm windows?
Major Systems. Plumbing, electrical, heating and cooling. What type of fuel does the heating system use? Approximate annual cost? A professional inspection of the major systems is recommended for a house that you are interested in purchasing.
House Hunting on the Web
At any moment a complete description of homes you would like to visit is available through Stewart Real Estate’s web site,
www.stewartrealestate.com . Here's how it works.
When a house is listed for sale by any area broker, the home's vital statistics are fed into the computer: the lot size; the age and kind of home (condo, townhouse, single family); style (colonial, contemporary, Cape Cod, etc.); material (brick, stone, wood); the number, size, and use of rooms (4 bedrooms, 2 1/2 baths, kitchen, living and dining rooms, family room, finished basement and attic, foyer, utility room, garage).
Also included are features (fireplace, walkout deck, patio, wooded lot); equipment (stove, dishwasher, carpeting, etc.); the heating and/or cooling systems; the water and sewage systems; the annual taxes; the mortgage balance, monthly payments and the amount of cash a buyer would need to assume the existing mortgage (if it's assumable), or the amount of cash required if the seller offers to take a second mortgage; and, finally, the price.
Finger-Tip Home Search
A buyer's requirements can be fed into the computer by a Stewart Real Estate Associate: particular neighborhoods, styles of homes; the number and kinds of rooms, and the price range. In minutes, the computer makes a quick search among the houses listed, and prints out all the houses that meet the buyer's criteria.
The computer also helps buyers determine which home sellers will offer seller financing. It can calculate the amount of mortgage payments at various interest rates, under various financing plans. It can also help evaluate the investment and the financing that is right for the buyer. Plus, it's updated each morning, as houses enter and leave the market. In short, it's the only way a buyer can check out almost everything that's "out there".
OFFER TO BUY
Negotiating the Purchase
You've found it—your "dream house"! You want to buy it. Now what? You make an offer by submitting a signed real estate offer to purchase with the type of financing you desire.
This will be the sales contract once the seller accepts. When you and the seller sign, you are agreeing to the contract conditions. Before you sign it, read it carefully and make sure you understand every detail. Ask questions. Verbal agreements should be written into the contract. This is where your Stewart Real Estate Associate can give you the assistance you need.
Offers and Counter Offers
Your Stewart Real Estate Associate will take the offer to a "contract presentation" with the home seller and the listing broker. In some areas, the three of them will discuss the offer, and the seller will accept it as written, or make "counter offers" on unacceptable aspects, or reject it. The selling broker will then bring back the offer to buy to the homebuyer, who can accept it, counter-the-counter offer, or reject it. The offer to buy becomes a contract when all parties have initialed every counter and signed the offer.
When you sign the offer to buy, you also will have to submit a deposit to show that you are earnest about your desire to buy—appropriately called "earnest money".
Making Sure Your Contract is Complete
Sales contracts differ, depending on circumstances, but there are several provisions you may want to include in a contract for the purchase of real estate.
1. Deposit. The amount of "earnest money" should be clearly stated, plus the amount of money you will be paying at settlement and your sources of financing. A common purchase deposit in many areas is 1-3% of the purchase price, deposited in escrow.
2. Contingency on Financing. Be specific about the total loan amount, the date a second or third mortgage is due, and the exact financing terms. Many contracts have an "alternative financing clause" that allows buyers to accept different financing than that which is written in the contract, as long as it doesn't affect seller's net proceeds.
3. Contingency on Inspection. You may make the contract contingent on a building inspection report. You will usually have to pay for this inspection, but the peace of mind or detection of a problem is well worth the cost of inspecting.
4. Termites. The contract may require the seller or buyer, depending upon the area, to pay for a termite inspection. The results of this inspection may further require payment for removal of the infestation and repair of any damages from the infestation. You should get a written report at settlement indicating that the property is free and clear of any active termite infestation. In some areas, well and septic certificates are also required.
5. Personal Property. Light fixtures, drapery rods, chandeliers, washers, dryers, refrigerators, heating oil in the tank, storm windows and doors, firewood, even swimming pool chemicals, and other items not physically attached should be specified in writing if they're to be conveyed to the buyer. Misunderstandings based on verbal agreements can delay settlement as well as cause friction.
6. Repair Work. Standard contracts of sale require sellers to be responsible for plumbing, heating, mechanical, and electrical systems to be in working order at time of settlement. You should conduct a "pre-settlement walk-through inspection" which should be made several days before or not later than the day of settlement.
7. Title Insurance Company. The buyer has the right to select a title insurance company. You should shop and compare prices before deciding what title company will conduct your settlement. Also, be sure to clear the title company with the lender, whose interests are also involved. Ask your Stewart Real Estate Associate for a list of our Preferred Providers, who provide settlement and insurance services throughout California.
8. Closing and Occupancy Date. Include an arrangement with the seller in the event you can't secure possession on the agreed date, such as a daily rent-back agreement for "post-settlement occupancy".
Locating The Right Loan
You have the option of shopping around for the best terms you can obtain. Generally, a mortgage acceptance requires 30-45 days for conventional, 45-60 days for VA and FHA from application to approval. In some cases, loans may be approved more quickly. Please ask a Stewart Real Estate Sales Associate for a list of our preferred mortgage partners.
Shop Smart For Mortgage Money
It used to be that qualified homebuyers simply went to their nearest bank or savings and loan for the standard, fixed-rate, 30-year mortgage or the VA/FHA backed loan. Interest rates were not highly competitive—back then.
Now, of course, things have changed. Competition among lenders is lively, and smart borrowers shop carefully to find the financing that best suits their circumstances and needs. Here's where to shop:
Mortgage Lenders. Mortgage lenders issue mortgages to borrowers. They then process and sell the mortgages to large investors or into the secondary mortgage market.
Mortgage Loan Brokers. Some individuals or groups charge a fee (usually to the borrower) to match borrowers with lenders. Sometimes they make direct loans. An advantage of working with mortgage brokers is that they often represent many investors and can provide you with many more financing alternatives, usually at the same price as the mortgage banker.
Financial Institutions. Mutual savings banks, savings and loan associations, insurance companies, and some commercial banks are the traditional sources of mortgage loans. Savings and Loans often grant favorable terms to their own account holders.
Private Lenders. Individuals (often home sellers) and groups (sometimes seller's employers—if the seller is being transferred) lend money. This source is especially helpful in arranging second mortgages, but can also assist with first trusts, wrap-arounds, and other mortgage plans.
Credit Unions. Federal credit unions can write 30-year conventional and government insured mortgages. Some will make loans; others may not. This may be a good source for credit union members.
Finance Companies. To compete with the more traditional lenders, some finance companies promise quick service and some do not charge mortgage "points" or "pre-payment penalties".
Ten Questions Most Lenders Will Ask You
Here's the information most lenders will need:
1. The amount of money you wish to borrow and the length of time you will need the money.
2. Your current address and any other addresses covering the previous 24 months.
3. Your social security number.
4. Your current employer's name, address and phone number and the same information for any other employers in the previous 24 months.
5. Your gross monthly income including documentation: most recent pay stub, final pay stub for any job you may have left in the current year and previous year's W-2 form(s).
6. Complete account statements (all pages) for any bank, credit union, retirement, or brokerage accounts.
7. Your assets (real estate, personal property, stocks and bonds, life insurance with cash value, etc.).
8. A complete list of your debts including account numbers, balances and minimum payments.
9. A copy of the sales contract.
10. An account, in writing, of any problems concerning your application and any documentation of the circumstances of those problems.
With this information in hand, here are the general steps the lender will take to process your application:
1. Verify the facts.
2. Get a credit report.
3. Make a property appraisal.
4. Review your application.
5. Decide whether or not to make the loan.
Some Questions You Should Ask Most Lenders
Here's how to shop; a few of the questions to ask a lender:
• Are both fixed-rate and adjustable mortgage loans available?
• What is the interest rate?
• What is the total origination charge?
• How long can I "lock-in" the financing at the current interest rate?
• What are the other fees a lender may charge me in conjunction with my loan?
• Are funds for a second mortgage available?
• On adjustable loans: How often will the interest rate be adjusted? Is there a maximum limit on each rate change? How often will the monthly payment be adjusted? Is there a ceiling on payment adjustments? Can the term of the loan be extended?
• Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity. About 80% of all loans in the United States are paid off early.
• What is the "grace" period? How late can a monthly payment be made before a late charge is assessed? What will happen if a payment is missed?
• If you sell your house, will the new buyer be able to assume your mortgage at the same interest rate?
• Do you have to pay "points" to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan.
• Will the lender require mortgage insurance?
Slicing Interest Rates
It is important to keep the tax advantage in mind when considering whether to rent or buy. A mortgage payment of $1,500 for example could result in a lower overall cost than an $1,200 rent amount after you consider tax advantages.
Remember a buyer may not realize this "tax break" until tax time comes around unless withholding taxes are decreased in anticipation of increased interest payment deductions. Please contact your tax advisor for more information.
Fire And Hazard Insurance
Most lenders require a homebuyer to provide a one-year paid receipt at settlement for a fire and hazard insurance policy, often called homeowner's insurance. These policies are available from several leading insurance companies recommended by Stewart Real Estate or the insurance company of your choice. Fire and hazard insurance provides protection for fire and other perils to your home and its contents.
What To Expect From A Home Inspector
What can homebuyers expect from a home inspector — besides a bill for $250 and up (depending on the size of property and/or complexity of the inspector's report)?
First of all, require proof of membership in the American Society of Home Inspectors. Next, expect a quickly-delivered (one or two-day) written report.
Expect practical returns. While you can see for yourself many flaws in a house, the practiced eye of a professional inspector can probably spot more, especially in areas not easily accessible to a homebuyer. Specific information could even reduce the price of a house if the seller will agree the price has not already been discounted for defects.
• Serious problems (heating, roofing, plumbing)
• Medium problems (insulation, paint)
• Minor problems (electrical outlets, kitchen sink)
If no serious problems are found, inspection can pay off indirectly in assurance that you are making a sound investment.
Many states now require that sellers provide buyers with either a residential property disclosure or disclaimer statement.
Title insurance provides protection in the event any of a number of past actions threaten the title to your property. Most lenders will require title insurance to protect their interests. Be sure to ask about an "owner's" policy as well, to protect your title. You may save money if you buy owner's title insurance at the same time as mortgage title insurance, rather than buying it separately later.
As a homebuyer, you may be able to save money with a "re-issue rate" for title insurance, if the property changed hands within the last several years. The title insurance may allow a lower "re-issue rate" premium because the recent title search is still valid. Consult your title attorney and insurance company.
After Loan Approval
After the lender approves the mortgage, the buyer will receive a "loan commitment letter" stating the mortgage amount, interest rate, and length of loan term. The buyer should check it carefully, and return a signed copy to the lender or follow other specific instructions.
Next, the selling and listing brokers will coordinate a settlement date. You should be sent a letter confirming the date, place, time, and a checklist of everything you, as the homebuyer, need to bring.
The purpose of the walk-through inspection on the day of settlement or several days prior to settlement is to determine if all conditions in the contract are satisfied. The time for the buyer to inspect and note defects for correction by the seller is during the contract negotiations and prior to signing the sales agreement. Repair or replacement items should be noted in the contract or contingent on a house inspection, otherwise, most resale homes are sold in "as is" condition.
It is up to the buyer to perform the walk-through inspection, not the seller, who may or may not be present. The buyer should be accompanied by the selling agent. The home seller should be sure utilities are on so that equipment can be operated.
Room By Room
The buyer should try all lights and switches; turn all faucets on and off, run shower, flush toilets; turn on the furnace and central air conditioning (in the off-season, buyer should hire a professional to certify proper functioning of both heating and air conditioning); test all stove burners, oven at bake and broil; run some ice cubes through disposal to test blades; run dishwasher, washer, dryer through complete cycles; open and close all windows and doors. In short, try everything, even keys and the fireplace flue.
All deficiencies should be noted, and funds may be withheld from the home seller by the settlement attorney for repairs, if seller does not correct problems prior to settlement. The selling broker will coordinate with the listing broker and seller to make repairs before settlement, if possible. Upon receipt of bills and notification that repairs are complete, the attorney will release balance of funds to the seller, if money is escrowed for needed repairs.
The Big Day!
The big day is here! Tonight you can pop open the champagne, but today there will be a lot of paper signing and a poignant passing of the keys (don't forget the garage keys and electric door opener, too).
At the settlement there will be a title company representative, notary all buyers, and selling broker/agent. The home seller should bring all warranties on equipment and any instructions on equipment maintenance or operation.
The title company will have searched the title, provided title insurance, and obtained old and new lender instructions. First, all unresolved walk-through deficiencies are resolved.
With the buyer, the escrow officer explains the deed of trust or mortgage; the deed of trust note or mortgage note; VA, FHA, or lender forms; and settlement sheets. Buyer signs all these and pays the balance of the down payment and buyer's closing costs with cashier or certified check.
Open Look At Closing Costs
"Closing costs" have lost much of their mystery in recent years.
Under the Real Estate Settlement Procedure Act (RESPA), the homebuyer is furnished an estimate of closing costs by the lender, in advance of the closing. In some cases, some of the closing costs may be paid by the seller; this is particularly true for new housing, where the seller is the builder.
Settlement fees vary widely depending on price, location, and other factors, but overall the buyer's costs usually average between 3% and 7% of the sales price. Items that are usually included in the settlement fees are the loan origination fee, mortgage insurance premium (M.I.P.), attorney fees, owner and lender title insurance, recording fees, county tax stamps, state tax stamps, and the survey fee. In addition, the lender will require an appraisal fee and a credit report fee in advance of the closing.
A few other items, not required to be listed under the law, may also have to be paid at a closing. These include advance deposits held in escrow for real estate property taxes and insurance. The lender collects a portion of these every month and then pays the insurance and taxes when they are due.
Because specific closing costs vary from area to area, and transaction to transaction, we encourage you to consult with your Stewart Real Estate Sales Associate. Sometimes closing costs can amount to a sizable sum. Remember that some of the items are tax deductible. Check with your tax advisor.
Signing On The Dotted Line
With the seller, the escrow officer explains the settlement sheets and gets the home seller's signature on them and the deed. Seller pays appropriate closing costs.
If the seller's taxes or insurance have been escrowed, the seller will receive any money accumulated in the account for bills not yet due. Additionally, the seller will be reimbursed for any money paid in advance and not used, such as property taxes. The seller will receive these refunds at or after settlement, depending on the area. Taxes and homeowners association dues or condominium fees will be prorated on a daily basis. Seller, buyer, and brokers are supplied a copy of settlement sheets for their records.
The house keys are passed. You are now the proud owner! Congratulations!
Different Mortgage Strategies
When it comes to paying for a home, buyers today have numerous financing options. This is a summary of the primary alternatives. Information about rates and programs is available from your
Stewart Real Estate Sales Associate through our preferred providers. Interest rates are for illustration only.
Conventional Mortgage. A conventional loan is a mortgage made between a lender and a borrower with no other parties involved (such as VA or FHA). Conventional loans customarily require a 20% down payment. Down payments may be as low as 5% with mortgage insurance.
Example: A buyer purchases a $400,000 home. The lender requires a 20% down payment ($80,000). At 7% the $320,000 balance has a monthly P&I payment of $2,391 over 30 years. Mortgage insurance could lower the down payment requirement to 5%, or $20,000, which increases the monthly payment.
Advantage: Conventional mortgages are straightforward and easy to understand. Conventional loans offer the largest variety of financing options.
Fixed Rate conventional loans feature equal monthly payments that are made over the term of the mortgage. The standard time period is 30 years or less. The interest rate remains the same which keeps the principal and interest payments the same over the term. Payments can vary if taxes or insurance escrow payments change.
Adjustable Rate loans are mortgages that allow for payments which change periodically over the life or term of the mortgage. An ARM loan has a set interest rate and payment for a period of time and then adjusts to the market rate at a predetermined point. ARM loans feature lower rates over the initial loan period.
VA Loan. The letters ‘VA' stand for Veteran's Administration – a branch of the US government. VA is not a lender but rather guarantees mortgages for lenders to help eligible veterans. VA loans require no down payment up to the VA maximum loan limit. VA loans can be assumed by qualified borrowers.
Example: A veteran purchases a $235,000 home. With no down payment the loan amount is $240,050 including the VA Funding Fee, for a first time veteran's purchase. At 6% interest over 30 years the monthly P&I payment is $1,439.
Advantage: VA requires no down payment. The seller can (but is not required to) pay all closing costs for a veteran.
FHA Loan. FHA is the Federal Housing Administration, a division of the US Department of Housing and Urban Development. FHA does not lend money; instead, like VA, it insures mortgages allowing lenders to make loans that might not be eligible for conventional financing. Down payments are as low as 3.5%*. Both fixed-rate and ARM mortgages are available. FHA loans are assumable by qualified borrowers. FHA mortgages have credit standards and other rules that are more flexible than typical conventional mortgages.
Example: A buyer of a $200,000 home makes a down payment of $7,000. The loan amount including up-front MIP would be $199,755. At 6% interest over 30 years the monthly P&I payment is $1,198.
Advantage: FHA offers a low down payment.
Peace of Mind
If you’re in the market to buy or sell a home, give yourself piece of mind with a home warranty from one of our preferred partners.
Stewart Real Estate is proud to recommend both of our home warranty preferred partners, Hisco Home Warranty, and First American Home Warranty.
Home Warranty Plan
Whether selling or buying a home, a Home Warranty Plan will help differentiate your home from other listings on the market and save you time and money in the event of a problem. No one knows when problems will come up and they seem to happen when you’re least prepared. Unplanned home repair expenses ruin many family vacations and holidays, and put a strain on the family budget. A Home Warranty covers mechanical breakdowns in major systems such as plumbing, electrical, heating and air conditioning, as well as major appliances.