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Local Foreclosure Info |
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For a list of
local foreclosures in Bucks County and other
real estate investment opportunities - be
sure to view our foreclosure center.
Get Started >> |
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Understanding Loans
There are many forms of loans
available in Bucks County. You want to look at the different
types of loans available, not just the going rates. The
below gives you a brief description on the types of loans
available, be sure to ask your broker for further details
and comparisons.
Fixed Rate Home Loans Offered for Bucks County Area
Fixed rate loans are loans ideal for those looking to lock
in a rate. This type of loan will have the same interest
rate for the entire life of the loan. There are a variety of
repayment terms, with 15, 20 and 30 years the most common.
Fixed Rate Loans are ideal for people who want the current
rate offered in Bucks County and want to keep it for the
life of the loan. They are ideal for homeowners who plan to
stay in the home for a long time and do not plan on moving
soon. The person who is more comfortable with certainty and
a clearly set path, will find great comfort in the Fixed
Rate Loan.
The 30 Year Fixed Rate Home Loan will have the lowest
monthly payment of the fixed rate loan choices. This keeps
home loan payments affordable by extending them over a
longer period of time. Majority of times you will find that
this solution offers the maximum tax-deductible interest,
but always check with your account first.
The 15 Year Fixed Rate Home Loan comes with higher payments
than the 30 year loan, but a lower rate. Over the life of
the loan, you will save considerable money on total interest
paid. The shorter timeframe allows you to build equity in
your home faster.
Adjustable-Rate Mortgages (ARMs) for Bucks County
Adjustable Rate Mortgages are mortgages where the interest
rate adjusts from time to time. The interest rate you pay is
adjusted to keep it in line with changing market rates. When
interest rates rise, your monthly home loan payments may go
up. The reverse occurs when interest rates go down, your
monthly home loan payments may go down.
ARMs are attractive because they offer start rates that are
lower than the interest rates of fixed rate home loans. This
typically enables you to begin with lower monthly payments
and qualify for a larger loan.
Typically people will go with the ARMs if they are planning
to sell the home in a few years and are less concerned about
possible rate increases. Another facet is they are confident
their income will rise enough in the coming years to handle
any increase in payments. As a result, they like that a
lower initial rate is offered and this enables them to
afford the home they want in Bucks County.
The mechanics of an ARMs works like this. The initial
interest rate, which tends to be lower than most current
rates, allows for a low month payment for a set amount of
time, for example 5 years. After this rate comes to an end,
the interest rate is based on the performance of a financial
index. For example, the average interest rate or yield on
Treasury bills. How often your payments are adjusted based
on the index, and how much rates and payments increase at
each adjustment depends on your loan terms. A 1-year ARM
adjusts once a year. At each adjustment, the new rate is
computed by adding the margin (a predetermined amount that
remains the same for the life of your loan) to the
predefined financial index. Two "caps" may put a limit on
the maximum amount your rate can increase. The periodic cap
sets the maximum your rate can go up from one adjustment
period to the next. The life cap sets the maximum interest
rate for the life of the loan. Some ARMs offer a conversion
feature that allows you to convert to a fixed rate loan at
certain times during your loan.
Fixed period ARMs for Bucks County
Does this type of vulnerability or fluctuation give you a
sour stomach? A fixed period ARM starts with a lower rate
than standard fixed rate loans. Your rate then stays the
same for the first 3, 5, 7, or 10 years, depending on the
fixed period ARM you choose. At the end of that period, your
interest rate adjusts every year like a regular ARM
according to a financial index (that's why some lenders call
them 3/1, 5/1, 7/1 and 10/1 ARMs).
The fixed period ARMs are good for people who plan on living
at the home for a short period of time and know they will
sell shortly.
Balloon Loans for Bucks County
Similar to Fixed Period ARM loans, with a Balloon Loan your
rate stays the same for the first 5, or 7 years, depending
on the type of balloon mortgage you choose. With a Balloon
Mortgage your monthly payment is calculated as if you will
pay off the loan over 30 years. However, this type of loan
requires that you completely pay your remaining balance (a
significant percentage of your original loan amount) in a
single payment after 5, or 7 years.
This loan may be suitable for those who will sell their home
or refinance on or before the balloon payment date. This
loan could be suitable for temporarily relocated workers or
others who are certain they will not stay in their new home
beyond the 5 or 7 year period.
Borrowers often enjoy a lower interest rate for this
program, because the borrower is not obligating the lender
to extend credit beyond the initial fixed period. Please
note that some balloon programs offer the borrower a
Conditional Right to Reset, which effectively provides for
an extension beyond the initial fixed period.
Government Loans for Bucks County
The Federal Housing Administration (FHA) and the U.S.
Department of Veterans Affairs (VA) offer government-insured
loans. These loans have features that make them easier for
first-time home buyers to obtain. These features include low
down payments and flexible lending guidelines.
FHA Loan Features for Bucks County
The FHA loan has numerous features. Instead of the common
20% down payment, the FHA loan allows for a 3% down payment
of the FHA appraisal value or purchase price, the lower of
the two. There are no maximum income or earning limitations
and both fixed rate and ARM loans are offered. An insurance
from the federal government replaces private mortgage
insurance.
VA Loan Features for Bucks County
The VA loan has its own desirable features. These include
the ability for qualified veterans to get a loan up to
$203,000, with no down payment, on fixed rate loans only.
They have more flexible qualification guidelines than FHA or
conventional loans.
Jumbo Loans (Loans over $300,700) for Bucks County
Loans that exceed $300,700 are called jumbo or
non-conforming loans. They exceed the loan amounts allowed
by Fannie Mae (Federal National Mortgage Association) and
Freddie Mac (Federal Home Loan Mortgage Corporation). These
are two government-sponsored enterprises that help
facilitate the availability of home loans by investing
throughout the country.
Non-conforming loans typically have a higher rate and
different requirements for your down payment.
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