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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Jun 25

Have You Ever Been Lucky?


Brad smallHave you ever been lucky? If you are one of the 1000+ loans I have closed a loan for in the last 15 months, you should consider yourself lucky because rates have been at historic lows. After hitting an all-time low of 3.25% in the fall of 2012 and again for a few hours in April 2013, rates are up significantly. Since May 2nd, the avg. 30 yr. fixed has risen to 4.5% up 1.25%. This enormous spike is something we haven’t seen in 50+ years as treasury yields have also spiked from 1.42% to 2.63% today. While rates are climbing, mortgages are still much cheaper than they were between 2005 and 2007, when the rates were around 6%. Even with mortgage rates increasing, home prices are expected to increase further as the chronically low inventory isn’t changing anytime soon. Last week the fed commented that, with an improving economy, they would be taking the gas off of their economic stimulus. The reasoning behind the tapering of their stimulus definitely caught a lot of us in this business off guard. Rates had already risen .50% before that meeting on hints he would say that. By reiterating it, we lost another .75% in rates. It is my belief and my prayer that the markets will calm down, and rates will settle if this is the new normal. It could take several weeks for this to happen. If the jobs report next week on the 5th of July is weak and unemployment goes up, rates should see drop as we see a nice rally. If the jobs numbers are better than expected, than we will definitely go higher.

I would be lying if I told you I wasn’t worried and concerned for the spike in rates. The refinance activity is down 80% from last month and it will continue to decline further. The purchase business is hot but there are only so many purchases to go around. There are always deals to be had and with rising values, those who couldn’t refinance in previous years might be able to do so now. Even those who had FHA loans with expensive mortgage insurance on loans to $417K with 5% equity or loans to $625,500 with 10% equity can get better terms with what’s called single premium mortgage insurance where more of the payment is tax deductible. Also, with the divorce rate approaching more than 50%, there is always a family who needs to refinance and take someone off the loan and possibly need to qualify another person for a new loan.

I appreciate everyone’s business and their referral’s over the last 16 + years and I am thrilled I could be a part of so many of your paths to financial freedom. If you have any friends, neighbors or family that are looking for some assistance for free and sound advice, I am always here to help. Even if there is no loan to be had, I want to help and make sure you aren’t taken advantage of. I can lend all over the country too except New York and Texas. Please give me a call or visit me at www.0points.com.







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