Joann Terrel, senior vice president and mortgage banker at SouthState in Mount Pleasant
In today’s uncertain housing market, understanding mortgages is more important than ever.
While there are many new and creative ways to finance a home, there are still three basic aspects of a mortgage that everyone should know about: monthly payments, upfront fees and down payments. Since mortgages usually involve a long term commitment, it’s important to understand how they work.
• Monthly payments: The amount needed to pay off the mortgage over the length of the loan. This includes a payment on the principal of the loan as well as interest. There often are property taxes and other fees included in the monthly bill.
• Upfront fees: Various costs you have to pay in order to get the loan.
• Down payment: The upfront amount you pay to secure a mortgage. Making a higher down payment gets you a better deal – a lower mortgage interest rate, fewer fees and a faster way to build home equity.
There are two main types of mortgages: a conventional loan, guaranteed by a private lender or banking institution, and a government-backed loan. There are several other types, but these are the most common.
Most government-backed mortgages come in one of three forms:
• Veterans Administration (VA) loans – These loans benefit veterans who served in the armed forces on active duty during times of conflict.
• Federal Housing Administration (FHA) loans – These loans were created to help people obtain affordable housing. FHA loans are actually made by a lending institution, such as a bank, but the federal government insures the loan.
• U.S. Department of Agriculture (USDA) loans – Backed by the U.S. Department of Agriculture, these loans are for rural property buyers who are unable to secure a home loan from traditional sources due to income that’s below average for their area.
To compete in today’s marketplace, it’s smart to find a mortgage lender who caters to the unique needs of borrowers. One such Lowcountry lender is Southstate Bank, which offers a variety of portfolio products using the bank’s money and also services the loans. These products include buyer’s advantage (100% financing to qualified first-time buyers); doctor loans for medical professionals such as doctors, dentists and veterinarians; construction to permanent loans; land lot; renovation; and jumbo loans.
Southstate also offers portfolio loans – a kind of mortgage that a lender originates and retains instead of offloading it on the secondary mortgage market. These loans can make sense for real estate investors, self-employed borrowers and individuals who may have had a recent financial hit that affected their credit scores.
After you choose your loan, you’ll decide whether you want a fixed rate or an adjustable rate during the life of the mortgage. Your choice determines the interest you’ll be charged.
According to Joann Terrel, senior vice president and mortgage banker at SouthState in Mount Pleasant and an Isle of Palms homeowner, “The choice of going with a fixed or adjustable rate depends on current market conditions and the home buyer or investor’s risk tolerance. An adjustable-rate mortgage allows the interest rate on your loan to vary with prevailing interest rates. So if rates go up, so will your mortgage interest rate and monthly payment. If rates go down, your monthly payments will drop.”
There are many other variables that mortgage professionals work with to get you the best deal possible for your particular income, funds available for a down payment and credit scores. They work with conforming and nonconforming loans based on the size of the loan, upfront fees (called “points”), interest rate “locks” and private mortgage insurance, which protects borrowers and lenders.
Although the current housing and mortgage markets are facing some uncertainty, an experienced mortgage banker can help navigate troubled waters to get you the home you want, whether it’s a rental investment or for personal use.
Terrel has worked in the mortgage and lending fields for more than 25 years, and, aside from helping traditional home buyers, she specializes in less typical loans, which are prevalent in the Lowcountry.
“While each year presents unique challenges, I can safely say that I’ve seen it all,” she said.
“The industry is cyclical; we’ve been through this before and will get through it again.”