Mortgages | Get a Free Mortgage Quote |
| Overview | A mortgage is basically a loan specific to the real estate market. Typically, it covers 70-90% of the purchase price of a house or other property, with the penalty for non-payment being foreclosure, or reversion of the property to the lender. They are available from most banks, credit unions, portfolio lenders and some government agencies. Mortgage loans usually employ a 30-year repayment (or amortization) schedule. Payments are a changing combination of interest and principal, so that in the early years a payment mostly consists of interest on the outstanding principal balance, but in later years the mix becomes much more heavily weighted toward paying the principal itself. There also is private mortgage insurance to consider, which is required if less than 20% is put down on the house. It has gotten easier to actually get rid of this extra payment as soon as possible. |
| Mortgage Is an Investment | Just as a stockbroker wouldn't buy into an equity without carefully researching the performance, earnings and returns of various companies, a homebuyer shouldn't jump into a mortgage without knowing what affects the cost and value of his of her potential purchase. While there is a very competitive market for mortgage loans, different lenders employ different criteria for judging your credit and sometimes use different formulas for rate escalations. It is important that you compare each lending institutions' policies and procedures to ensure that there are no hidden dangers or extra fees involved. |
| Needs Analysis | Before approaching a lender or making a final decision on a home, it is essential for the prospective borrower to evaluate his or her needs and future plans. Making long term goals and knowing how each type of loan works can have a major impact on how much money is spent during the lifetime of the loan. It is also crucial to consider how your needs and income might change over the duration of the loan. In short, it is a perfect time to make a financial plan. Contact us if you'd like help. |
| Loan Process | Learning the administrative and legal aspects of the loan process is essential for anyone considering a loan. A borrower should know what contracts and documents he or she will encounter, and how to negotiate through the paperwork. Also, it is important to be aware of what fees may be assessed and how to minimize or eliminate them wherever possible. |
| Types of Mortgages
| Whether looking for a first home or simply refinancing an existing loan, homebuyers have a myriad of mortgage options available to them. The key variable is for how long you want to lock in a rate and whether you think rates are likely to rise or fall in the future. Generally, you will pay a higher rate today the longer you fix the term. Also, except for the 15-year fixed mortgage, almost all the loans amortize over 30 years: Fixed Rate Mortgage is the most familiar of all home loans, the fixed rate 30-year or 15-year mortgage maintains the same interest rate for the entire term of the loan, making it an ideal choice for those who are willing to take a slightly higher interest rate in exchange for guaranteed static interest rate Adjustable Rate Mortgage, often called an ARM, is a mortgage whose interest rate is set for only the first few months or year, after which the rate generally rises and will fluctuate with the level of short-term market rates. The advantages of this type of loan is that the initial interest rate is usually lower than that of a fixed rate mortgage, and if interest rates stay low it can save you money. On the other hand, if rates rise, your payment rises and budgeting is harder. Homebuyers who may have a harder time qualifying for higher fixed rate mortgages, or who believe that they will be refinancing soon, may well want to take the risk of an ARM. Balloon Mortgages are shorter term loans of three to seven years that start with the level payment structure of a fixed rate mortgage. At the end of the term, however, the remaining principal balance is required to be paid in full. At that time you can pay off the mortgage or refinance the loan. Another option for those who do not have long time horizons and want lower short-term rates. Government Loans also are available to the public. Some of the programs are designed to assist members of low-income or special-interest groups. FHA, Veteran's Affairs, Freddie Mac, Fannie Mae, and the Department of Agriculture all offer some form of government loans. |
| Mortgage Terms | |
