Guide to Finding the Right Mortgage Program
Buying a new home is an exciting time in everyone’s
life, but it can also be one of the most stressful.
Unless you have done it before, it is important
to know your options when selecting a mortgage
in Mesa. There are many choices when choosing
the type of mortgage that best suits you doing
a little research first, can save you money in
the future.
Looking for a Mortgage? Know
Your Options
There are several things to consider when shopping
for a mortgage:
1. How long do you want to stay in this house?
2. Can you afford to make mortgage payments
bi-monthly?
3. How is your credit?
Answering the questions above, will assist you
in determining what type of mortgage is right
for you.
How long do you want to stay in this house?
If your answer is 15 to 30 years, you may want
to consider a non-variable rate mortgage. With
this type of mortgage, your rate will be set from
day one, and unless you refinance, the rate will
never change. If your answer is 5 to 10 years,
you may want to consider a variable rate mortgage.
This type of mortgage, usually gives you a lower
set interest rate for the first five years and
then the rate becomes variable after that. With
a variable rate mortgage you will benefit from
the lower interest rate during your first years
in the house.
Can you afford to make mortgage payments bi-monthly?
Some mortgage companies give you the option of
making your mortgage payments either once a month
or splitting it in half and paying it bi-monthly.
By paying bi-monthly, you lower the total amount
of interest paid on your loan and decrease the
time to pay off your mortgage. A mortgage of 30
years may be shortened by quite a few years if
you pay your mortgage bi-monthly.
How is your credit?
Many times people believe that having bad credit
will make it impossible for them to obtain a mortgage.
This is not true. There are lenders that specialize
in developing mortgage programs for people with
poor credit. Initially, you may pay a higher interest
rate then someone with good credit, but over time,
if you make regular payments and slowly improve
your credit, your mortgage rate may be lowered.
The process of obtaining a mortgage can be simplified
if you know what you are looking for. So good
luck shopping!
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Listed below are a few types of common
mortgage loans
ARM (Adjustable Rate Mortgage
Loans)
If you think that you are only going to be living
in your home for a few years an Adjustable Rate
Mortgage is the best. An adjustable rate mortgage
is also referred to by the acronym "ARM".
ARMS's have a set interest rate and steady monthly
payment for a number of years. The mortgage loan
payment is usually based on the amount to payoff
the entire mortgage balance at the end of the
term, which is usually 30 yrs.
The most common types of ARMS are 1 yr, 3/1 yr,
5/1 yr and 7/1 yr ARM, After the initial period
is over, the rate and term of the mortgage will
be adjusted annually to current market mortgage
rate if you do not refinance the loan. Most ARMs
have caps on how much the interest rate may increase
after the loan expires. ARMS are very popular
because the rates are usually about 2-3% lower
that a fixed rate which means lower payments.
The less number of years usually means the lower
interest rate. A 1 yr ARM will have a lower interest
rate than a 5/1 year term. ARM.
Fixed Rate Mortgage
Loan
If you know that you are going to be in the house
for a number of years then a fixed rate mortgage
is best. A fixed rate mortgage is the most common
home finance method and usually are 15 yr or 30
yr mortgage loan. A fixed rate mortgage loan is
good if you know you will be living in your home
for a long time and you don't have to worry about
your payment ever increasing. Monthly loan payments
will be the same for the entire life of the loan.
The first payment will be the same as the last
payment.
If home mortgage interest rates increase you
have an advantage because your loan interest rate
is locked-in at a lower rate which means your
mortgage loan payment will not increase. But alternatively
if interest rates drop your rate will not go down
unless you refinance your mortgage. Rates went
up to 18% at one time and as low as 4% recently
so it is hard to tell what will happen in the
future.
A 15 year home mortgage will have a somewhat
lower interest rate but higher monthly payments
than a 30 year fixed mortgage rate. The advantages
to this type of mortgage financing is that you
will get more home-equity by paying down the principal
balance. You also will have the loan paid off
faster and will not have paid as much total interest
when the loan ends. It could save you $100,000
or more in interest.
A 30 or 25 year year home mortgage loan will
usually have a higher interest rate than a 15
year and a lower payment. This is a good type
of loan to get if you are short on money or cannot
qualify for the higher mortgage payment. If you
start to make more money and want to pay off the
mortgage balance faster you can always set up
bi-weekly payments with your lender. You also
can just pay more money every month and apply
it to the principle balance. Mortgage lenders
rarely impose a penalty for this.
Interest-only mortgages
An interest only mortgage is where the borrower
only pays the interest on the loan each month.
This means property debt never declines. Many
borrowers get this type of loan because the rates
are real low and the payment is low. An interest-only
mortgage may be good if you expect to earn a lot
more in a few years and know you will be able
to afford a higher mortgage payment later on where
you can always refi your loan. Mesa homeowners
may choose interest only mortgages because they
are going to invest funds and make money on the
savings on the difference between an interest-only
mortgage and a regular amortizing house mortgage
loan with principle and interest.
You should always shop around for the best deal
because it could save you thousands. You should
also be aware of the fees, points and any other
charges from the lender. The lenders want your
business and their rates and terms are always
negotiable.
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