Jun 27

Fixed Rate Mortgage Details for First Time Homebuyers

If you are a first time buyer there are many things that you need to look into before you secure a fixed interest rate mortgage to pay for your new residence. Some of the things you look into are going to depend on what you can afford to pay both as a down payment and as monthly payment. One thing that people often forget to factor into their monthly mortgage payments is the fact that interest is included, which can get very tricky to calculate if you do not choose a fixed interest rate mortgage.

Couple getting mortgage advice from an expertThis is why many first time buyers who like the idea of sticking to a strict budget like the idea of a fixed rate mortgage since they know their monthly payments will remain the same no matter how the housing market is performing. The other advantage is that sometimes while you may be overpaying, when the market is high your interest rate cannot be increased thus protecting you and keeping your home affordable while at the same time saving you money in the first place.

Another advantage of a fixed interest rate mortgage is that when you choose this option you can usually opt for a lower down payment which is what may first time buyers need in order to get their feet wet. What you end up paying for your mortgage will depend on your credit ranking and the amount of the purchase you choose to make. For example, jumbo mortgage rates are usually about .5% higher than any other confirming fixed interest rate mortgage because they are a higher risk for lenders and also require a higher down payment. So the size of the mortgage you hope to secure is going to play a fundamental part in the interest rate you pay.

While paying a higher down payment can also help drive down the costs of a high fixed rate loan, especially in cases where self-employment may force you to take out a stated income mortgage or a no doc mortgage, you can take advantage of FHA mortgage lenders to secure a lower interest loan with a lower down payment as well. In fact, FHA mortgage lenders are also a great option for people who do not have perfect credit, because they receive government funding to back your loan guarantee.

In order to be eligible to work with FHA mortgage lenders you typically have to be looking at a responsible purchase, not a jumbo mortgage, with a fair credit score. You also have to be able to make at least a 3% down payment although in some severe cases there are options for a zero down payment and not have a foreclosure on your credit record in the last three years. There are different grades depending on your credit score and income so if you have any questions about how the federal program can help you your best option is to set up an appointment with FDA mortgage lenders.

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Jun 26

Understanding the Best Mortgage Loan for You

One of the most important parts of a real estate transaction is securing the right mortgage loan. Fortunately for today’s borrowers there are plenty of types and options available. It is a matter of having good enough credit, earning enough income and deciding on which type best fits the situation.

howtoscorebestrateFixed Rate Loans

The most traditional choice for a real estate mortgage is a fixed rate loan. This is a debt that is fully amortized, meaning that the interest rate is fixed for the life of the loan and the interest and principal are spread out over the whole term making the monthly payments basically the same each month. These are very predictable real estate loans and often considered some of the safest mortgages. The terms can vary and can be anywhere in the range of 5, 10, 15, 20, 30, or even 40 years long.

Adjustable Rate Mortgages

Adjustable rate mortgages (ARMs) are popular because they often terrifically low interest rates, at the beginning. The intial period can last from one to ten years, but after it is over the interest rate is allowed to rise and fall based on certain market indexes.

These loans can be very helpful for getting first-time home buyers and those with poor income or credit into the real estate market, but the danger lies in the adjusting rate period. Without a constant rate it can be very difficult to know how much the monthly payment will be which means it can be hard to plan out in advance how much will be needed.

And sometimes the rates can really skyrocket making the payments unaffordable for some real estate buyers. These debts are best if buyers refinance before the introductory rate period is over or for those who are very financially savvy.

Balloon Real Estate Loans

Balloon loans act like fixed rate loans, for a period. During the 10, or 15 year term, the interest rate and payments are relatively low, but at the end of the period, the entire remaining balance is due in full. This might seem like a very impossible debt to repay, but they are really designed to be refinanced before the balloon payment comes due. The advantage is in the relatively low rates and payments.

Jumbo Loans

For those buying real estate in the pricier parts of the country, a jumbo loan will typically be required to cover the cost of the purchase. Conventional limits are set by Fannie Mae and the limit is the largest loan amount that Fannie and Freddie Mac will guarantee.

Because most lenders want the reassurance of these conventional loans, they charge higher interest rates for loans that are not backed by the government-sponsored agencies. That is the basic difference between jumbo and conventional real estate mortgages, although income and asset requirements are typically higher as well.

Owning your own piece of real estate whether as your residence or for investment purposes can be an exciting venture. Getting the best mortgage loan for your purposes can help make the journey much smoother.

 

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