Financing Your Home

Please contact Ian Olsen to review your specific questions and mortgage needs.

After selecting the perfect home it is important to choose the home loan that best suits your needs. Seattle Mortgage can assist you in selecting the right home loan program from a diverse offering of a wide-range of loan programs, including:

Fixed Rate Loans offer a set interest rate and payment amount for the full length of the loan, usually 15 or 30 years.

Adjustable Rate Mortgages (ARMs) or Variable Rate Loans typically start with a lower interest rate than most Fixed Rate loans. The interest rate on these loans changes after a predetermined amount of time and the monthly mortgage payment adjusts accordingly. After a preset payment period (usually 1, 3, 5, or 7 years) the interest rate man adjust (usually semiannually or annually) on the basis of the movement in a specified index. As the interest rate adjusts, the mortgage payment will also adjust.

FHA Loans are insured by the Federal Housing Administration. FHA loans allow homebuyers to put as little as a 3% down payment on a home. These loans also allow the down payment or closing costs to be paid by a gift. FHA loans may not be available for all homes.

VA Loans are guaranteed by the Department of Veterans Affairs and are available to veterans and those currently serving in the military. VA loans are often made with little or no down payment. VA loans may not be available for all homes.

Second Trust Deeds/Second Mortgages provide an alternative to mortgage insurance. These loans are also called “piggyback” loans because the second loan is often added to the first loan. Many lenders refer to these programs as an 80/20, 80/10/10, or 80/15/5. The 80/10/10 program, for example, is based on a first mortgage for 80% of the home’s value, a 10% down payment, and a second trust deed for 10% of the home’s value. Second trust deeds/second mortgages typically have higher interest rates than first trust deeds.

Bridge Loans are short-term loans that draw on the equity of your existing home to bridge the period between the closing of the home you are buying and the closing of the home you are selling. Bridge loans are only available in select areas.

100% Loans do not require a down payment. Borrowers must pay closing costs.  The above mentioned loan programs are general examples of the types of loans that may be available to homebuyers. Whether any particular loan program is available to you will be based on your ability to meet that loan program’s underwriting guidelines. We cannot guarantee that any particular loan program or interest rate will be available to you.

Choosing the Right Loan There are a number of factors that must be considered when choosing a loan program. Some questions to consider when making your decision:

1. How long do you plan on owning your home? If you plan to own your home longer than 5 years, conventional wisdom suggests that a Fixed Rate loan may be most appropriate for you. Although the interest rate on Fixed Rate loans tends to be higher than the initial interest rate on Adjustable Rate loans, Fixed Rate loans have a fixed interest rate and a consistent payment amount for the life of the loan, typically 15 or 30 years.If you plan to own your home less than 5 years, conventional wisdom suggests that you may want to consider an Adjustable Rate Mortgage (ARM). The initial interest rate on an ARM is typically lower than a Fixed Rate loan, which will result in lower monthly payments for the initial set period of the loan. One of the disadvantages of an ARM is that after the initial period (typically 3, 5, or 7 years) the interest rate on the loan adjusts periodically in accordance with market conditions (typically limited by an interest rate cap). In a rising interest rate environment your monthly payment could significantly increase as a result of these adjustments.

2. Will your finances change over the next few years? If you expect your income to increase over the next few years you may want to consider an ARM loan. Your initial interest rate will be lower with lower monthly payments that may increase as the loan matures. The lifetime interest rate cap of the ARM loan prevents the interest rate from increasing past the set cap.

3. How much of a down payment can you afford? There are many loan programs available to accommodate smaller cash down payments. Homebuyers who make down payments of less than 20% of the purchase price of a home will most likely have to pay mortgage insurance, which is added to the monthly mortgage payment. As an alternative to paying mortgage insurance, many homebuyers qualify for an 80/10/10 loan program, which eliminates the need for mortgage insurance but requires the homebuyer to take a first mortgage equal to 80% of the home’s sales price, a second mortgage equal to 10% of the home’s sales price, and to make a cash down payment of 10% of the home’s sales price.Many cities and counties also have down payment assistance programs for qualified buyers. You can contact your local city or county office to find out if these programs exist in your area and whether you are qualified to participate in any program.

4. Do you want to pay off your mortgage quickly? If you are interested in paying off your mortgage quickly and saving money by paying less interest, a shorter-term mortgage (with a higher monthly payment as compared to a typical 30 year loan) may be your best option. There are a number of options available, including 15- and 20-year Fixed Rate mortgages.