TYPES OF MORTGAGE LOANS

Although there are many variations, mortgage loans are usually categorized as conventional or government insured loans. Until recently conventional mortgages often required a 20 percent down payment; however, with the increasing cost of housing, this became impossible for many buyers. Mortgage loans are widely available with as little as a 2% to 20% down payment. Interest rates are usually slightly higher for loans made with smaller down payments, and buyers who have less than a 20 percent down payment are usually required to purchase mortgage insurance which offers additional security for the lender. Government loans require as little as 0% to 5% down payment. FHA (Federal Home Administration) and VA (Veteran Administration) are the most popular government loans. While FHA mortgages are available to the general public, VA mortgages are only available to current members of the armed services, veterans or the spouse of a veteran who died of a service-related injury.

Over the past several years home buyers as well as banks have demanded more flexibility in mortgage alternatives. Most people still feel more secure with a fixed rate mortgage, which assures the same interest rate and principle payment for the life of the loan. Fifteen, 20 and 30 year fixed rate mortgages are available.

Adjustable rate mortgages (ARM) usually mean lower initial mortgage payments and higher payments in future years. Adjustable rate mortgages have gained some popularity because of the initial lower interest rates, which allow buyers to qualify for a more expensive house. The interest rate is adjusted periodically and may result in higher monthly payments, which can put the borrower at risk if income does not increase as well. The holder of an ARM should budget for higher mortgage payments in case interest rates increase significantly. The interest rate on most new ARMs is capped, and cannot be adjusted by more than two percentage points per year or six percentage points over the life of the loan in most cases. While it is true that monthly payments may also be reduced if interest rates go down, most borrowers will experience an increase in their payments in the first few years to compensate for the very low initial rate that was provided.

Homebuyers and homeowners should be aware of predatory lending practices. Predatory mortgage lending can strip borrowers of home equity and threaten families with foreclosure. Prime targets for predatory lenders are the elderly and people in lower-income groups. These lenders usually push their services on those who need money for medical bills, property taxes or high-priced home repairs by describing their loans as the answer to financial difficulties. But instead of providing access to money with reasonable rates and terms, predatory lenders push loans with exorbitant interest rates and high fees. Understanding the home buying process is important to prevent becoming a victim of predatory lending.

SPECIALIZED MORTGAGES

Local banks and mortgage lending offices often offer several different affordable mortgage products to fit individual needs. These loans are available to home buyers whose maximum gross income does not exceed 80 percent to 150 percent of the median for Pinellas County . They usually require less income and less cash for closing than standard mortgage loans. Buyers may not be required to have minimum cash reserves in the bank. A lower down payment is required and buyers may be able to use a cash gift or a loan from a nonprofit or government agency for a portion of the down payment and closing costs. Borrowers are generally required to attend home buyer classes on home financing and ownership before closing on their loan. Some of the lenders offer their special mortgages exclusively through a particular local program (See SPECIAL HOME BUYING OPPORTUNITIES) but others will work with any home buyer that meets their guidelines.

FHA SECTION 203K PROGRAM

This federally insured loan, available through local participating lenders, is of particular interest. Under this program, the borrower can get one mortgage loan to purchase and repair or modernize and refinance an existing home. The mortgage amount is based on the projected value of the property with the work completed. Loan products change frequently and new opportunities may become available at any time; therefore home buyers should shop for the loan that best meets their needs.

U.S. Department of Housing and Urban Development (HUD)
Contact HUD's regional Management and Marketing Contractor: First Preston Foreclosure Specialists at 1-800-934-3009 or access their web site at WWW.hud.gov

A HUD Home may be a single-family house, a town home, condominium or other type of residence. The properties are deeded to HUD by mortgage companies who had foreclosed on FHA-insured mortgage loans. HUD then contracts with a Management and Marketing Contractor to sell these homes through licensed real estate brokers at market value. All homes are sold through electronic bid. Listings are available on the Management and Marketing Contractor's web site.

Individuals may make offers to purchase properties through a licensed real estate broker. HUD will review the offers received and accept the best one that meets its criteria. The properties are listed according to FHA financing codes. If the property is listed as IN (Insurable) or IE (Insurable with Repair Escrow) it is eligible for FHA 203(b) financing. If it is listed as UI (Uninsurable) the property is not eligible for FHA insurance, but may qualify under the FHA 203(k) loan program. All HUD properties are sold "as is" on a cash basis. The electronic bidding process has some very specific policies and procedures regarding deposits, timeliness of bids and awarding of bids. All of these are described on the Management and Marketing Contractor's website.

Veterans Administration Foreclosed Properties
Ocwen Federal Bank FSB
12650 Ingenuity Drive
Orlando , FL 32826
www.ocwen.com

The Department of Veterans Affairs (VA) manages and sells properties acquired as the result of foreclosure on VA guaranteed loans through Ocwen Federal Bank FSB. Properties available through Ocwen can be located at their website at www.ocwen.com or through local Multiple Listing Services. An interested party may contact a local sales agent of their choice to view a VA property.

Special Homebuying Opportunities