Homeownership Out of Reach? Don’t Give Up Yet.

Home affordability is a top concern for many Montanans. With prices high and availability low, many see home ownership as out of reach. Please don’t give up yet.

There are many types of mortgage loan options and programs available to help you buy a home. However, it can be time consuming to research and confusing to know which one is best for you. It depends on things like your credit history, income, down payment, how long you’ll live in your home, and more.

Despite all the options out there, there are only five basic mortgage loan types:

Conventional (Conforming) Loans
This is the most common mortgage loan type and is best for borrowers with a good credit score and down payment. Your options range from 10 to 30-year terms with fixed rates and payments. While some people suggest a shorter-term mortgage to save thousands in interest payments, our Chief Lending Officer, Justin Sanders proposes a different approach.

“A 15-year mortgage is very powerful if you can afford the monthly payments. But a 30-year loan gives you more flexibility for life’s unexpected expenses,” Sanders stated. “Go with a 30-year term instead and make one extra payment a year. By doing that, you’ll pay off your mortgage in 22 years instead of 30.”

Jumbo (Non-Conforming ) Loans
Jumbo loans are best for buyers who are looking to finance a loan in excess of $766,550*. They’re called Jumbo because they exceed the conventional loan limit set by the Federal Housing Finance Agency.

Government-Backed Loans
These loans include VA, USDA/RD, and FHA loans, and are best for borrowers with little to no down payment. It’s important to note that not all lenders offer the three loan types.

• Veteran’s Administration (VA) Loans offer U.S. military veterans 100% financing which can save a borrower hundreds of dollars monthly. If you or your spouse currently serves in the military or you’re a veteran, Sanders suggests asking about this loan option.
• US. Department of Agriculture (USDA)/RD Loans are 0% down and are based on the income restrictions of the entire household. They could be a good option for those who desire a home in a rural or eligible suburban area. Densely populated, urban areas are not eligible. Eligibility requirements do apply.
• Federal Housing Administration (FHA) loans ease credit and down-payment requirements to as little as 3.5% down to help families buy a home. Please note that Clearwater does not currently offer FHA loans.

Fixed-Rate Mortgage
With this loan, your interest rate and payment (loan principal + interest) remain the same over the life of the loan. That makes them best for people who plan on staying in their home awhile and who like a predictable monthly payment. Terms typically range from 10 to 30 years.

Adjustable-Rate Mortgage (ARMs)
These loans come with a rate that adjusts over time. It starts out with a lower, introductory fixed rate for a set time period, typically between 3 and 7 years. After that period, the rate adjusts based on pre-determined intervals. The lower, introductory rate makes ARMs best for those who want a lower payment upfront because they don’t plan on staying in their home long.

Within each loan type, there are many different options available. We asked, Sanders for advice on where to start.

“I always tell people to start with a licensed, mortgage loan professional,” Sanders said. “A good one should ask questions about you, your family, and your goals as a homeowner. Along with a few more questions about your income, debt, and expenses, and a bit of number crunching, they’ll be able to outline your options so you can make the best choice for you.”

Sanders went on to say that the added benefit of working with an expert is that they’ll have the latest information about low and no-down payment assistance or other specialty loan programs that may be available to you. For example, Clearwater offers custom loan programs to meet the unique needs of Montana borrowers, such as our Manufactured Home (not on a permanent foundation) and Next Door Neighbor loans.

“Our mortgage team’s number one goal is to help homebuyers get into homes they can afford,” said Sanders.

We’re Here to Help.
There is no doubt home affordability has become a serious challenge for Montanans, but please don’t give up on your home ownership dream yet. Give one of our mortgage loan officers a call and let them help you explore all the ways possible to make your dream a reality.

 All loans are subject to approval. Equal Housing Lender. NMLS#447584. Insured by NCUA.

*this amount varies by state, $766,500 is the current amount in Montana. For updated amounts for your state visit www.fhfa.gov