Know Your Basics When It Comes To Mortgages

There are many different types of mortgages available to home buyers, and there are many decisions to make when deciding what type of loan is right for you. For the sake of simplicity, we have boiled it all down to the following options and categories. Mortgage_Loan_Approved1

Option 1: Fixed vs. Adjustable Rate

As a borrower, one of your first choices is whether you want a fixed-rate or an adjustable-rate mortgage loan. All loans fit into one of these two categories, or a combination hybrid category. Here’s the primary difference between the two types:

  • Fixed-rate mortgage loans have the same interest rate for the entire repayment term. Because of this, the size of your monthly payment will stay the same, month after month, and year after year. This is true even for long-term financing options, such as the 30-year fixed-rate loan. It has the same interest rate, and the same monthly payment, for the entire term.
  • Adjustable-rate mortgage loans (ARMs) have an interest rate that will change or adjust from time to time. Typically, the rate on an ARM will change every year after an initial period of remaining fixed. It is therefore referred to as a hybrid product. A hybrid ARM loan is one that starts off with a fixed or unchanging interest rate, before switching over to an adjustable rate.

Option 2: Government-Insured vs. Conventional Loans

You’ll also have to decide whether you want to use a government-insured home loan (such as FHA or VA), or a conventional type of loan. A conventional home loan is one that is not insured or guaranteed by the federal government in any way.


Government-insured home loans include the following:

FHA Loans
 The Federal Housing Administration (FHA) mortgage insurance program is managed by the Department of Housing and Urban Development (HUD), which is a department of the federal government. FHA loans are available to all types of borrowers, not just first-time buyers. The government insures the lender against losses that might result from borrower default. Advantage: This program allows you to make a down payment as low as 3.5% of the purchase price. Disadvantage: You’ll have to pay for mortgage insurance, which will increase the size of your monthly payments.
VA Loans
 The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families. Similar to the FHA program, these types of mortgages are guaranteed by the federal government. This means the VA will reimburse the lender for any losses that may result from borrower default. The primary advantage of this program is that borrowers can receive 100% financing for the purchase of a home. That means no down payment whatsoever.

Option 3: Jumbo vs. Conforming Loan

There is another distinction that needs to be made, and it’s based on the size of the loan. Depending on the amount you are trying to borrow, you might fall into either the jumbo or conforming category. Here’s the difference between these two mortgage types.

  • A conforming loan is one that meets the underwriting guidelines of Fannie Mae or Freddie Mac, particularly where size is concerned. Fannie and Freddie are the two government-controlled corporations that purchase and sell mortgage-backed securities (MBS). Simply put, they buy loans from the lenders who generate them, and then sell them to investors via Wall Street. A conforming loan falls within their maximum size limits, and otherwise conforms to pre-established criteria.
  • A jumbo loan, on the other hand, exceeds the conforming loan limits established by Fannie Mae and Freddie Mac. This type of mortgage represents a higher risk for the lender, mainly due to its size. As a result, jumbo borrowers typically must have excellent credit and larger down payments, when compared to conforming loans. Interest rates are generally higher with the jumbo products, as well.

Education is the key to making smart decisions, as a home buyer or mortgage shopper. Read more online at:

If you are ready to buy or sell property in the South Bay area, contact Bill Ruane today!

Tips for First-time Home Buyers

Buying your first home can be a daunting task. How does one even begin? Apart from the overwhelming task of finding a home you actually want to live in, you have to think about things like mortgages, down payments, closing costs, taxes, insurance, and that’s just the money part of the process! This guide can help you start the sometimes stressful but always exciting process of buying your first house.

Before you start looking for a home, get pre-qualified for a loan. A lender should be able to advise you on how much money you can actually afford to borrow. Once you know your budget, you will have a much better idea of what areas and types of houses are available to you.

  • Make a list of your “must haves.”
    • How many bedrooms and bathrooms do you need?
    • How much space do you want?
    • How big do you want the kitchen to be?
    • Do you need lots of closets and cabinet space?
    • Do you need a big yard for your kids and/or pets to play in?
  • Don’t forget to think about:
    • the kind of neighborhood you want
    • types of schools in the area
    • availability of public transportation
    • the length of your commute to and from work
    • the convenience of local shopping.
    • safety concernsfirst time home buyer image
    • the rate of home appreciation in the area.

If you are a low or moderate income homebuyer, there are special programs designed to help you. These loans are available through private lenders, as well as local and state housing agencies, like the California Housing Finance Agency (CalHFA). Most lenders specializing in real estate mortgage loans are aware of these types of loan programs. CalHFA has first and junior loan options, including low to zero interest rate down payment assistance loans. Visit to learn more about this.

These are just the very basics of starting the home-buying process. Having an experienced, knowledgeable realtor by your side can make it so much easier and less stressful. If you are looking to buy a house in the South Bay, California area, Bill Ruane is the expert you need to guide you through the process. Call today to start looking for your new home!

Preparing Your Home for Sale? Be Smart About Home Improvements

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Selling one’s home ranks right up there with life’s major stressors.  How much money a homeowner should put into enhancing a property for sale is a controversial issue.  If you spend too much, you might not get it back; if you don’t do enough, your property doesn’t compete well in a crowded market.  Despite what you hear on TV and what conventional wisdom says, the most important improvements for selling your home may not be the sexiest.

According to Remodeling Magazine’s 2014 Cost vs. Value Report, the greatest return on your investment will come from projects such as replacing the front door with a steel one, adding a wood deck, replacing old siding, replacing the garage door, and replacing old windows.  These aren’t big-ticket items in terms of price or luxury, but they give your home an instant updated aesthetic that buyers are seeking.

When determining how much to spend, consider price range, region, and what comparable homes for sale in the neighborhood have to offer.  Your home improvement strategy should be uniquely tailored to what your home needs to be competitive.

If you live in a hot market and complete a popular project, it’s possible that you will see a return on your investment.  Homeowners in San Francisco are likely to see huge payoffs on midrange attic bedroom, kitchen, basement and bathroom remodels; bathroom, deck, family room, second-story and garage additions; entry-door and garage-door replacement; and siding replacement.  Returns range from 109.8% to 177.6%.  Even if you don’t live in a hot market, you might see a significant jump in your home’s resale value when you make changes that bring it in line with the majority of homes in the neighborhood.

Don’t let TV shows, your personal taste, or your emotions guide your home improvement decisions.  Consult with a real estate agent about the conditions in your local market, and stick to the upgrades that research and experience have proved worthwhile.

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