Financing in Las Vegas
Las Vegas Mortgage Lender - loan types
Home prices have almost doubled since this document was created, so please treat these numbers as a very rough guide. The good news is... prices are likely to rise steeply over the next five years, so this is still an excellent time to invest.
All examples are based on:
If you put less than 20% down, mortgage insurance is required. With a 5% down payment, the loan amount would be $114,000 and the monthly payment including principal and interest would be $836.49. Add mortgage insurance (PMI) of $76.00 and then add taxes of $100.00 and fire/hazard insurance of $29.17 Your total payment including principal, interest, insurance, taxes and PMI... $1,041.66
The same purchase with a 20% down payment:
There is no mortgage insurance required when the down payment is larger than 20%. For down payments between 5 and 20%, ask your lender for mortgage insurance rates.
Interest rates will vary depending on the term of the loan. For example, when the current rate for a 30 year mortgage is 8.00%, the rate for a 20 year loan may be 7.75%, and for a 15 year fixed-rate, only... 7.50 or lower. Of course, your monthly payments will be considerably higher.
Interest rates also vary from lender to lender and from day to day. If interest rates are particularly good today, you may ask your lender to lock the rate for a given period of time... typically 30 or 45 days.
Adjustable Rate Mortgage (ARM)
The big advantage of an ARM is that the interest rate will be lower than that of a fixed rate loan... today! Currently, ARMs are running around ...6.13% Using our example of the $120,000 home, the monthly principal and interest of an ARM would be $729.13 instead of the fixed-rate payment of $836.49 This would amount to monthly savings of ($107.36) If it sounds too good to be true...
The rate can adjust each year. On a typical ARM, the rate can adjust no more than 2%, up or down, each year and no more than 5% over the lifetime of the loan. This 5% cap could mean that at some point in the future you could have a rate of... 11.13% with a monthly P & I payment of... $1,096.43 or a rate as low as, hmm..1.13%! The 2% yearly cap means that it would take at least 3 years before the worst happened. Don't forget all the savings you enjoyed in the first year. The ARM rate is typically tied to an interest-rate index such as T-bills.
All ARMs are not created equal! Some of the popular types allow for a lower fixed-rate for 5 or 7 years and then convert to the previous type of ARM for the remainder of the term. These are called Conventional 5/25 and 7/23 mortgages. If you plan to live in the home for less than 5 or 7 years, this may be the style of mortgage for you.
GOVERNMENT INSURED MORTGAGES
Federal Housing Authority (FHA)
FHA contrary to popular belief does not lend you money.. they insure the lenders and charge you insurance rates. For the buyer with less than a 10% down payment, an FHA-insured mortgage may be just the thing.
On normal FHA transactions the down payment is 3% on the first $25,000 plus 5% on the remaining balance. In our example, that would be $750 plus 5% of the remaining $95,000 for a total of $5,500.00.
A word about closing costs. When you make an Offer to Purchase, I will show you a complete breakdown of all costs involved in "closing" the escrow,. On FHA mortgages, many of these costs can be financed into the loan. This results in less "out-of-pocket" expense. If you are financing the closing costs, and most people do, then here is how we would calculate an FHA fixed-rate 30 year mortgage:
Monthly P & I on this mortgage would be $870.77
Department of Veteran's Affairs (VA)
American veterans may qualify for a VA loan. The most popular VA-insured loan is the $1 down variety. A dollar down means that the total move-in cost, including closing costs, should not exceed one dollar! VA will insure a loan up to $204,000 and will add a 2% funding fee to the loan. If you're a vet, your monthly P & I on our sample home will be $898.13 plus taxes and insurance.
By the way, FHA will insure adjustable rate mortgages as well. Check with your lender for rates.
Farmers Home Administration (FmHA)
The government makes these loans available to persons of moderate to low income in rural areas.
Borrowers can lock in the price of a house today and postpone financing for 12 to 18 months. The borrower gives the seller a deposit that is applied towards the purchase and makes monthly rental payments until the purchase date.
A 2nd mortgage can be used to make up the shortfall between the selling price and the amount a lender is willing to finance. A 2nd may be financed by the seller, another lender, relative or investor. These mortgages usually carry a higher interest rate than the 1st.
QUALIFYING FOR A MORTGAGE
The two main factors in qualifying are:
A lender will want to meet with you to discuss your current financial situation. Eventually they will want to see W-2 tax returns, recent pay stubs and maybe some bank statements. With your permission, the lender will then do a credit check. Lenders are there to make loans! They are working for you to try to design the best possible type of loan that will work in your situation. The more cooperative you can be, the faster this process will be completed.
Buydown is a method of lowering the initial interest rate on a mortgage. Many builders offer points as a means of paying the difference between the actual rate and the rate offered to the buyer. In a typical buydown situation you may pay 6.5% the first year, 7.5% the second year and 8.5% for the remaining 28 years.
Point: an amount equal to 1% of a mortgage that is paid at closing. A point is usually considered to be prepaid interest and represents the difference between the rate being charged on the mortgage and the amount the lender wants to receive. Points can be paid by the seller or the buyer... or anyone else.
Assumable mortgages allow a new buyer to assume the responsibility of making payments on an existing mortgage. FHA loans made before Dec. 15, 1989 can be assumed without the buyer qualifying. Similarly, VA loans made before March 1, 1988 are "noqual" assumables.
OWC or "Owner Will Carry" is a situation where the seller is in a position to offer his own financing to the buyer. The owner may own the home free-and-clear, in which case he could finance the entire amount. More commonly, the owner has some equity in the house which he can use to help finance a 2nd mortgage. The general rule in this case is that he will not finance an amount greater than the buyers down payment.
Contract of Sale - A purchase transaction in which the buyer receives possession of the property, but the seller retains title. Avoid this scheme like the plague.
AITD/Wrap - not much better than a contract of sale.
Nevada State Housing Loans - are available to 1st-time homebuyers with a combined family income of less than $43,500. Ask your lender.
30 Good Reasons to Contact a Lender
Cash, Conventional, FHA, VA, Buydown, Owner Will Carry, 2nd Deed, AITD, Contract of Sale, Fannie Mae, Nevada State Housing Loans, HUD, Adjustable Rate Mortgage, No Qual, Assumable, Stated Income, Private Lender, 1031 Exchange, No Doc Loan, Zero Down, Assumable with Qualifying, Title One, SBA, 125% Refi, Weighted Average, Jumbo, Balloon, 6mo. Libor, Equity Line, Reverse Mortgage
Today's homebuyer has many financing options. A good lender can help you explore the most suitable possibilities. Without a lender's pre-approval, you may be wasting time looking at homes that are too modest, or too extravagant, for your budget. Most people qualify for more than they think.
One more excellent reason
When I present your "offer" to a seller, the offer carries much more weight when you have been pre-approved. Sellers, and their agents, don't want to tie up their listing waiting for weeks to see if you qualify. Being pre-qualified can save you thousands of dollars! A seller may accept a lower offer simply because you are already approved.
There are many lenders in Las Vegas... some good and some not so good. I have worked with some very good lenders and will be happy to recommend them to you.