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	BUY A HOME

Home ownership - it's one of the biggest decisions you'll ever make. At Dancing Star Realty, we want to make your home purchase a very pleasant experience. Buying a home should not be a stressful but it should be one where you learn what loan program is best for you. This will be your decision in coordination with your lender. Take a look at each type of home loan to decide which one is right for you: Purchase Loans: choose from fixed-rate, adjustable-rate, government, balloon, jumbo, and more Fixed Rate Adjustable Rate (ARM) Balloon Mortgage Governmental Loans (FHA or VA) Jumbo Loans Second Mortgages Refinance Loans: learn how easy it is to lower your current monthly home loan payments Construction Loans: choose from building and renovation funds as well as lot loans and receive potential tax savings* Home Equity Loans/Lines of Credit: borrow from the equity in your home to finance home projects, major purchases, or withdraw money and spend what you like, up to your maximum credit line. *Please consult your tax adviser Fixed Rate This type of loan features a fixed interest rate that remains constant for the life of your loan - your monthly payments (principal and interest) will always be the same. Most homebuyers choose 15- or 30-year fixed-rate loans, although 10- and 20- year loans are also available. I've even heard of 40 year loans…of course, the interest rate is generally higher on these. Fixed-rate loans are usually your best choice when interest rates are low, and you plan to stay in your home for at least five years. Fixed-rate mortgages include home loans for a variety of potential homebuyers. These include: Low- and no-down payment programs: these are often ideal for first-time buyers, and/or buyers who have not saved a large down payment, but prefer to buy a home and begin building equity immediately Balloon loans: loans for homeowners planning to sell or refinance within seven years, or who want to enjoy lower interest rates and monthly payments when upgrading to a larger home Government programs: home loans that are sponsored by the FHA (Federal Housing Administration) and VA (Veteran's Administration) Jumbo loan programs: loans for homes selling at more than $359,650 Second mortgages: these are often combined with first mortgages to eliminate the need for private mortgage insurance (PMI) [Top of Page] Adjustable Rate Mortgages (ARMs) Also called ARMs, adjustable-rate mortgages have a unique interest rate feature that changes, or adjusts over the life of the loan. An ARM may be an attractive option if you desire a slightly lower interest rate during the initial stages of owning your home, if you expect that your income will rise in the future, and/or if you are not planning to stay in the same home for more than several years. An ARM may also have an initial interest rate that is lower than the interest on a fixed-rate loan. Depending on your loan's requirements, your initial payments will begin with a fixed interest rate. After the stated timeframe in your loan agreement, your interest rate will be adjusted by adding a pre-determined margin to a specific index like Treasury bills or COFI (Cost of Funds Index). ARMs are generally referred to as 1/1, 3/1, 5/1, and/or 7/1 - this means that the initial fixed interest rate period is for one, three, five, or seven years, respectively, and the rate is adjusted every year thereafter for the life of the loan. In addition to the adjustment period (3/1, 5/1, and/or 7/1), there are other types of ARMs, including: [Top of Page] Balloon Loan A balloon mortgage is a fixed-rate loan with a set payment for a specific number of years, followed by a larger "balloon" payment, which is due at the end of the loan's term. Balloon mortgages generally have a lower interest rate than a comparable fixed-rate mortgage. They are frequently used when buyers plan to sell or refinance their home within seven years, or want to qualify for a larger home. The balloon program's lower interest rate and monthly payment may make it possible for buyers to qualify for a larger home than expected. Three scenarios in which a balloon mortgage may be right for you: Selling your home, relocating, or retiring to a smaller home in the near future Expecting interest rates will decline in the future Anticipating a large, lump-sum amount of cash in the future [Top of Page] Government Programs These are home loans that are sponsored by the FHA (Federal Housing Administration) and VA (Veteran's Administration) FHA (Federal Housing Administration) The Federal Housing Administration - commonly known as FHA - is not a lender. Instead, the FHA provides mortgage insurance to help more people buy homes. In turn, this insurance makes it possible for a lender or mortgage broker to offer FHA-qualified buyers a flexible down payment option of just 3% or less! Other advantages of FHA-backed financing include more lenient credit requirements, plus the allowance of "gift funds" - for instance if a family member or employer wants to contribute to your down payment. FHA loan limits vary per state and county, and are subject to credit approval and certain restrictions. To simplify your home shopping experience, be sure to consult with your lender before you commit to anything. VA (Veterans Administration) Currently, more than 29 million military veterans and service personnel are eligible for Veteran's Administration (VA) home financing. VA home loans offer homebuyers several major advantages: for example, many require no down payment for homes valued at up to $240,000. In addition, VA home loans usually feature lower interest rates than other home loans and home mortgages. Other features of VA home loans include: No monthly mortgage insurance premiums to pay Your closing costs are limited, saving you more money No pre-payment penalties [Top of Page] Jumbo Loans If you live in an area where home prices are often over $359,650, you need to talk with your lender about Jumbo loans. Both fixed-and adjustable-rate loans are available - some up to $5,000,000! You'll need to discuss with your lender how to use a combination of loans to eliminate the private mortgage insurance (PMI) requirement, by dividing your total amount financed into two mortgages, also called a first and second lien. For example, you may qualify for an 80/15/5 loan, which means you would finance 80% of your home's cost with the first lien, and 15% with the second lien - and just 5% down! These loan programs may also enable you to qualify for a lower interest rate. [Top of Page] Second Mortgages If you're not able to produce a 20% down payment to purchase a home, but want to avoid the additional expense of private mortgage insurance (PMI), you can combined a second mortgage to pay for all or most of the needed down. A creative lender will suggest this to you. Instead of taking out a single mortgage, your lender can "split" your total mortgage into a first and second mortgage, eliminating the PMI requirement. These are often called combination loans. Usually, these loans divide your mortgage into the following percentages: First mortgage equals 80% of the sales price Second mortgage equals 15% of the sales price You'll need to produce a 5% down payment * Sometimes your lender can do a 100% loan with the first being an 80% loan and the second, 20%. You will still be responsible in paying your own Closing Costs and Pre-Paids (those items that you'll need to pay for in advance such as your appraisal fee.) There are also times where we can ask the Seller to pay your Closing Costs and Pre-Paids, creating a full 100%, no out of pocket expense situation for you! Gee, getting into a home for no money at all! [Top of Page] Refinance Loans If you already own a home, but would like to take advantage of current low interest rates, you may be interested in refinancing your loan. Refinancing allows you to lower your monthly payments, get cash back, shorten the term of the mortgage, and consolidate your first and second mortgage into one loan. Until recently, the rule of thumb for refinancing was to wait until mortgage interest rates were at least 2% lower than your current rate. But with newer low- and no-closing cost refinancing programs, you may benefit from refinancing with smaller rate reductions. Take a look at some of these refinancing loans and guidelines to help you decide the right one for you: Fixed-Rate Mortgages: enjoy the predictability of a fixed interest rate for the life of your loan Adjustable-Rate Mortgages: take advantage of low introductory rates and monthly payments [Top of Page] Construction Loans Does building your dream home seem overwhelming? Don't worry, there are loans available that will help you into your home creating a one-step financing to finance the construction loan and the final loan all in one process! Doing this can save you money! When it comes to construction lending, some creative lender can offer construction loans for new home construction, renovation of a pre-existing home, or interest-only loans for real estate lots. One-Time Close Option The One-Time Close loan option features combined construction and mortgage financing, which simplifies building a home. Instead of taking out two separate loans, your One-Time Close loan combines construction and long-term financing into one loan The One-Time Close option saves you time and money Choose from a variety of mortgage options, including fixed- and adjustable-rate loans Down payments as low as 5% are available You may receive potential tax benefits during your home's construction (consult your tax advisor for details of potential savings) Your builder will appreciate the added convenience of our One-Time Close option. They'll feel more comfortable knowing your home loan financing is already approved, and our easy draw procedures that maintain your builder's cash flow during construction is an added bonus. Mortgage Renovation Plus If you're shopping for a home, you may have already found at least one property that would be perfect - with some renovations completed before you move in. That's where a Mortgage Renovation Plus financing can help. In addition to your home loan, you can receive additional funds for: Adding another bathroom or bedroom Building a deck or garage Remodeling one or more rooms Updating the kitchen or bathroom After your Mortgage Renovation Plus loan closes, your lender will hold your renovation funds and arrange to pay an approved builder in accordance with a pre-approved construction schedule. Lot Loans Found the perfect location for your custom-built home? Offered in conjunction with our One-Time Close option, the Lot Loans offer interest-only financing with a one-year term, so you'll have plenty of time to review your builder's plans before construction begins. Loans for up to two acres are available whether you're a city slicker, or your new home is "on the range." [Top of Page] Home Equity Loans/Lines of Credit A home equity loan/line of credit allows you to tap into the money you've invested in your home to finance larger debts, and usually at a lower interest rate than most revolving credit options.* For example, a home equity loan can help you remodel your home, send a child or grandchild to college, or consolidate any outstanding loans. (Some states prohibit or restrict equity-based loans and lines of credit. Please check with your lender before you apply.) Another advantage of equity-based lending is that the interest paid may be tax-deductible. (Be sure to consult a tax professional for details.) To find out what your current equity is worth, simply subtract your outstanding mortgage balance from your home's current value. Depending on the appraisal and loan program, your equity may be worth more than you originally thought. Take advantage of home equity loans with low fixed-rates and predictable payments and you'll receive all the funds up front. Usually, you can choose from the following equity-based financing that's best for your situation: Home Equity Loan: a fixed-rate loan that you usually receive as a lump sum. Repayments are similar to a fixed-rate mortgage - your repayments will be the same every month. Home Equity Line of Credit (HELOC): a revolving line of credit that is similar to a credit card, as you're able to withdraw and spend what you like, up to your maximum credit line. Also, as you pay back a withdrawal, the repaid funds will be available for future use. HELOCs have variable interest rates that may rise and fall during the time your HELOC funds are available. When the original term expires, you must pay off all remaining debt, although you may have the option to apply for a renewal of your credit line. [Top of Page]