Mortgage Options

When it comes to Newport Beach real estate, buying and mortgages almost always go hand in hand. In fact, even as a seller, you'll need some mortgage savvy when dealing with potential buyers and their agents. Whether you're looking at Newport Beach homes for sale or putting your own home on the market, it helps to understand the different mortgage types used in Newport Beach CA. Some terms you'll commonly encounter are:

Mortgages by payment structure

Fixed-rate Mortgages

A fixed-rate mortgage has a single interest rate that doesn't change for the life of the loan. This is offers the most stability among other loan types, and therefore works very well for most Newport Beach real estate buyers. The traditional term for a fixed-rate mortgage is 30 years, but in Newport Beach CA some lenders offer terms as short as 10 years or as long as 40.

Adjustable-rate Mortgages

ARM loans have variable interest rates that change according to market conditions. A common feature in ARMs is the initial fixed-rate period, wherein the first few years have a low guaranteed rate designed to attract borrowers. This made it very popular in the Newport Beach real estate market a few years ago, although the housing crisis has slowed it down considerably. ARMs are usually a good choice for buyers who plan to refinance in the next few years or who do not expect to stay in their Newport Beach homes for the duration of the loan.

Balloon Mortgages

In a balloon mortgage, you pay off your loan over 30 years just like a fixed-rate mortgage, but the balance becomes due earlier. Typically, you will make payments based on a conventional mortgage for the first few years, but you must pay the balance in full afterwards. Many people choose to refinance the loan afterwards to avoid the balloon payment and get more stability.

Interest-only Mortgages

These loans allow you to pay only the interest on your home every month, and pay off the principal after a given period (in Newport Beach CA, this is usually one to two years). This plan is usually recommended for people who earn infrequent bonuses or commissions, expect a significant raise in the next few years, or who plans to put the monthly savings in a secure investment.

Mortgages by provider

Conventional Mortgages

As the name suggests, this type of mortgage is the most common for Newport Beach homes. Conventional mortgages aren't insured by the government and have loose down payment requirements, with minimums ranging from 0% to 3%. Some lenders also offer alternative programs where you can get mortgage insurance despite a low down payment; your agent or loan officer can help you decide which plan best suits your needs.

VA Loans

VA stands for Veterans Administration. These loans are guaranteed by the VA and, as implied, are offered only to qualified veterans. VA loans allow you to finance 100% of the home; that is, you don't need to make a down payment. However, borrowers have to pay a funding fee at the closing, which can go up to 3% of the loan amount.

FHA Loans

These loans are backed by the Federal Housing Administration (FHA) and have some of the lowest down payment requirements. This makes it a popular choice for people buying their first Newport Beach homes. In an FHA loan, you pay a one-time premium for mortgage insurance during closing, and a small premium is added to the monthly payments. These premiums vary according to the loan-to-value ratio, so some Newport Beach homes will carry higher premiums than others.