Types of Mortgages
What is a mortgage?
Pretty simple if you think about it – A mortgage is a legal agreement between you and a lender that lets you borrow the money to buy a home in exchange for your repayment of the loan, plus interest, over a certain period.
What is the difference between a fixed-rate loan and an adjustable-rate (ARM) loan?
A fixed-rate mortgage loan is for borrowers who prefer to keep the same rate and monthly payments throughout their mortgage. BankSouth Mortgage offers a variety of down payment options for fixed-rate mortgages.
An adjustable-rate loan offers a fixed rate for a set determined amount of time (3, 5, 7, or 10 years), with the possibility of the rate changing for the remaining life of the loan. ARMs typically offer lower initial rates and, therefore, lower initial monthly payments than fixed-rate mortgages. This type of mortgage is ideal for borrowers who don’t plan to stay in their home very long or want to take advantage of falling interest rates without refinancing.
How do I know which type of mortgage is best for me?
Your BankSouth Mortgage Loan Officer can help. There are many types of mortgages out there. Our job is to find the one that fits your unique needs. We’ll help you understand how home financing works and help you pick a mortgage that puts you in control and makes sense for your financial needs. Talk to a BankSouth Mortgage Loan Officer about your options. Learn more about our team here.
What is a Jumbo mortgage loan?
A jumbo loan is a loan with a loan amount larger than the limits set by the Federal Housing Finance Agency (FHFA) and followed by Fannie Mae and Freddie Mac. For most parts of the country, the 2023 Conforming Loan Limit is $726,200 for a single-family home. Loan limits are higher in more expensive counties. Because of the large size of these loans, the interest rates tend to be higher and the approval requirements more stringent. BankSouth Mortgage offers jumbo programs with low down payments.
What loan options are available through BankSouth Mortgage?
Many different mortgage options are available for buyers in every situation and stage of life. When you begin thinking about buying a home, contact your BankSouth Mortgage Loan Officer or get prequalified utilizing our ReadyLoan App. A prequalification gives you an estimate of the size of the mortgage loan you qualify for based on your credit history, income, and assets. Once done, your mortgage banker will discuss loan options, down payment requirements, and current interest rates.
What types of federal or state programs exist to help me afford a mortgage?
The Federal Housing Administration (FHA) loans offer many benefits for those seeking a low down payment with less-than-perfect credit. As an FHA-approved lender, BankSouth Mortgage could provide you with an FHA-guaranteed loan if you qualify.
Highlights of FHA Loans include:
- Less restrictive qualification guidelines
- Designed to benefit many first-time homebuyers
- Some borrowers may qualify for down payment assistance
- FHA refinance products, including low documentation or streamlined refinance options, are also available.
- FHA’s Streamline Refinance program allows qualified FHA-insured homeowners to refinance without an appraisal.
USDA Loans are an excellent option if you’re purchasing a home in a rural area. Funds can be used to build, repair, renovate, relocate a home, or buy a home. There are no down payment requirements, and qualifying is typically easier than conventional mortgages. The property must be in an eligible area to qualify, and income caps also apply.
Highlights of USDA Rural Loans include:
- 100% financing options available
- Thin or alternate credit allowed
- Low monthly mortgage insurance
- No maximum sales price
VA Home Loans
You served with honor; now, let us honor your dream of home ownership with special financing for our country’s military personnel. VA loan programs offer favorable terms and include options to buy, build, renovate, and refinance your primary residence. Veterans and spouses may also qualify.
You can request proof of eligibility by contacting the VA Loan Eligibility Center (1-888-768-2131) or by having your BankSouth Loan Officer order this certificate for you.
VA loans have a one-time Funding Fee, unless the Veteran/borrower is exempt, with no monthly fee charged. Of course, the best way to find all the federal and/or state programs that can help you secure a mortgage is to talk to a BankSouth Mortgage Loan officer who can help you through the process.
Highlights of VA Home Loans include:
- 100% financing options available
- No monthly mortgage insurance
- No underwriting costs or lender origination fees (optional)
- Thin or alternate credit allowed
What is refinancing?
Refinancing is the process of a borrower paying off their current home loan with the proceeds from a new mortgage. There are many reasons to refinance your home. These could include taking advantage of a lower interest rate, shortening the terms of your mortgage, renovating your home, or obtaining cash from your equity to finance a significant life milestone.
Refinancing your mortgage could be a wise financial decision when interest rates are relatively lower. At BankSouth Mortgage, our experts are here to answer your questions and consult with you about your refinancing options. Best of all, our ReadyLoan app is accessible on your laptop or smartphone, making it easy to apply for your BankSouth Mortgage quickly and conveniently. BankSouth Mortgage offers premier mortgage services with best-in-class loan originators. With ReadySelect from BankSouth Mortgage, you can customize the term of your loan from 10 to 30 years, giving you the flexibility to time your mortgage payoff with life’s milestones.
When should I refinance?
When you refinance a loan, you replace the current loan with a new one. There are various reasons to go through this process, from lowering your interest rate to planning for life’s important milestones. Let’s look at the most common reasons homeowners refinance their mortgages, starting with reducing the monthly payment by getting a lower rate.
- Get a Lower Rate to Reduce Your Monthly Payment
If you are a homeowner looking to reduce your monthly payment and purchased your home with a higher interest rate than is being offered now, you may want to consider refinancing your mortgage. Lowering your interest rate has a two-fold benefit. Not only does it lower your payment, but it also increases the speed you build up equity in your home.
- Take Cash Out of Your Home’s Equity
When you owe less than your home is worth, that means you have equity built up in your home. Up to 90% of the difference between what you owe and your home’s worth can go to you in cash, depending on the lender’s guidelines and your qualifications. You can spend the money on home improvements, debt consolidation, paying off student loans, or any other financial needs you may have.
- Eliminate Private Mortgage Insurance (PMI)
Is your loan backed by the FHA, or did you purchase your home with less than 20% down? If so, there is a good chance that you have PMI. Private Mortgage Insurance protects lenders if a borrower falls behind on their payments. If the new loan amount you get when you refinance is less than 80% of your home’s value, you will not likely have PMI on your new loan.