Guild Mortgage Inlanta Michigan offers a robust lineup of government-backed and conventional home loan options for new home purchasers from every walk of life. We’ve helped many newly-minted home owners in Grand Rapids get out from under landlords to own their own first homes. We’ve helped established families across West Michigan with Jumbo mortgage loans. We’ve helped veterans across the state get into homes with no money down. And we really enjoy working with USDA products to help rural home owners throughout the state buy homes in the pastoral beauty of the Mitten.
We work closely with area real estate agents to make sure your home-hunting process is flawless, and that when there are multiple offers on a property, you’re confident to submit a winning bid backed by a bullet-proof Pre-Approval through our detailed vetting process.
In this section, we’re going to focus on five important elements of New Home Mortgage options:
- Why Get Pre-Approved instead of just Pre-Qualified?
- What is a Conventional Mortgage?
- What is a Government Backed Mortgage?
- What is Private Mortgage Insurance?
The Importance of Pre-Approval
In the current Michigan real estate market, where competitive bidding is rampant, walking in without a pre-approval letter is like turning up with a knife at a gun-fight. You might win, but you’d better hope lady luck is on your side!
Other mortgage companies may issue you a “pre-qualification” letter that is simple and quick to obtain, but is nowhere near as confidence-inspiring from the sellers standpoint as a Pre-Approval letter. At Guild Mortgage, we front-load the work to give you the BEST odds of winning your bid, and not leaving anything on the table.
Guild Mortgage Michigan Mortgage Pre-Approval Program Benefits:
We do all the financial due diligence up front, including income verification, analysis of debt load, and credit history review and verification. If we say you’re Pre-Approved, you’re REALLY pre-approved. Why don’t other lenders do so much legwork on the front end? We don’t know, but the pre-qualification letter some lenders write often aren’t worth the paper they’re written on when it comes time to close. By contrast, our Pre-Approval program ensures a no-surprises closing on your dream home.
- We customize property-specific letters – FAST – so that all your prospective sellers see is the amount you’re offering. Think about it. If they see a higher approval amount on a generic pre-approval letter, will they necessarily accept your offer, or sign back for more?
- We give you the FULL payment detail involved in purchasing the home on which you’re making the offer so that you know exactly what to expect in terms of payments and closing costs.
- We can help you strategically determine your best offer. In some cases, it makes sense to include seller concessions, whereby the seller pays for up to 6% of your closing costs.
Conventional Mortgages
What are Conventional Mortgages?
A conventional loan generally refers to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac. Most mortgages are conventional mortgages. Conventional mortgages can be fixed-rate or adjustable rate mortgages and typically have terms of 15 or 30 years. Conventional mortgages can be conforming or non-conforming. Conventional mortgage loans are ideal for borrowers with excellent credit who can afford a higher down payment. Some programs offer a low down payment option as well, as low as 3% in programs offered by Fannie Mae or Freddie Mac for qualifying applicants. While many people think of “conventional” mortgages of involving a 20% downpayment, in actual fact, through the umbrella of Fannie Mae or Freddie Mac, there can be a range of downpayment amounts. The 20% downpayment factors into whether or not you need to pay for Private Mortgage Insurance (PMI) or not. But it is not the defining characteristic of a “conventional” home loan.
What is the difference between Fixed Rate and Adjustable Rate Mortgages?
Adjustable-rate mortgages, or ARMs, fluctuate in relation to the rate of a standard financial index, such as the LIBOR. Monthly payments can go up or down accordingly. Fixed-rate mortgages interest rate remains the same through the term of the loan; therefore, payments are the same each month.
What are Conforming and Non-Conforming Loans?
Conforming loans follow the terms and conditions set by Fannie Mae and Freddie Mac. The Office of Federal Housing Enterprise Oversight (OFHEO) sets the criteria for what constitutes a conforming loan limit that Fannie Mae and Freddie Mac can buy. Currently, the conforming limit set by OFHEO is $453,100 for most areas of the United States. Loans in excess of $453,100 are considered Jumbo Mortgage Loans.
Government-Backed Mortgages
A government-backed home loan is a mortgage subsidized by the government, which protects lenders against defaults on payments. This makes it a lot easier for lenders to offer potential borrowers lower interest rates. The primary goal of government-backed mortgages is to make home ownership affordable to lower income households, first-time buyers and other targeted types of purchasers.
Guild Mortgage Inlanta receives special training and qualifications in helping Michigan homeowners access a full range of preferential government-backed mortgage programs, such as:
- MSHDA New Purchase Loans – Michigan low downpayment (eg. 1%) option for qualifying first time or repeat purchasers
- FHA New Purchase Loans from the US Federal Housing Administration – Downpayments as low as 3.5% with less stringent credit history and debt-load ratio requirements.
- VA Home Loans (New Purchase) – Preferential mortgage options for Veterans with no money down, lower private mortgage insurance payments, among other advantages.
- USDA Rural Development New Purchase Home Loans – Preferential to lower income rural home purchasers in qualifying rural areas. Can be no money down with lowered private mortgage insurance premiums among other advantages.
For more details on each program and eligibility, please follow the links to each program summary page, or Talk to Us for the short strokes and latest updates.
What Is Private Mortgage Insurance – and What is PMI vs. MIP?
Private Mortgage Insurance, or PMI, is a product purchased by the home buyer designed to protect the lender from the risk involved in funding the mortgage. In conventional mortgages, it is usually required on homes where less than 20% downpayment has been applied. Said another way, it is required when the “LTV” – loan-to-value – ratio is less than 80%. PMI essentially protects the lender in the event of a borrower defaulting on a loan and being unable to repay the debt. The insurance covers the difference between the fair market value of the home and the actual price a lender may be able to sell the property for. It allows lenders to recover their investment, even if the property’s worth is not enough to pay off the loan balance.
FHA Loans Are Different
On FHA Loans, there is a different type of mortgage insurance, commonly called Mortgage Insurance Premiums (MIP). In this case, there is mortgage insurance charged to the original loan, plus monthly insurance.
The FHA currently charges an upfront mortgage insurance premium (UFMIP) that’s equal to 1.75% of a home’s value for most new mortgages. You can typically roll this fee into your total loan balance. On top of that, the FHA levies a yearly fee that varies based on how large of a down payment you placed when you took out your mortgage:
- 30-year loan term, LTV less than or equal to 95% : 1.30% annually
- 30-year loan term, LTV greater than 95%: 1.35% annually
Most borrowers don’t have any choice when it comes to PMI. Many borrowers, especially first-time homebuyers, cannot afford a 20% down payment in the current economic climate. Without PMI, people wouldn’t be able to borrow as much as they can now. Without an additional safeguard, lenders would have no incentive to offer loans with down payment requirements as low as 3%. Instead of saving up for a 20% down payment that could take years, private mortgage insurance offers homebuyers access to mortgages much sooner.
How much is mortgage insurance
Private mortgage fees can vary, though borrowers typically pay a monthly charge of approximately $40- $50 per $100,000 borrowed. For instance, someone with a $300,000 home loan can anticipate private mortgage costs being around $120- $150 per month. The larger your loan, the higher the PMI, so make sure to factor this fee into your home buying calculations.
PMI origination fees and monthly premiums change frequently. Check with your Guild Mortgage mortgage specialist for current PMI rates for conventional and government-back mortgages.