More Bang for
Your Buck With Mortgages
More Bang for Your Buck with Mortgages
by Elaine VonCannon
Choosing a knowledgeable mortgage lender can
make a difference in the quality of home you are
able to purchase with your finances. I prefer to
recommend a mortgage broker to my clients,
because they usually offer 50 or more programs.
Regular mortgage companies are usually locked
into one source. Take time to research a
mortgage lender. And, remember, creative
financing can be the way to go if you need a
higher priced home with more space.
Home buying is different now then when your
parents or grandparents purchased a home. When
they bought real estate, 30-year mortgages were
the standard. That’s because 10-15 years ago, a
person bought one or no more than two homes in
their lifetime. Currently, Americans tend to own
more than three homes in their lifetime.
Creative Financing
Find a lender who knows the business inside and
out and can make your dollar go further. Ask
your realtor to research the housing market in
your area, to predict a rise in property value
for that area. When you seek a mortgage, obtain
quotes from three or more lenders. Make certain
at least one of these is a mortgage broker. Ask
how many loan products they have to choose from.
Flexible Mortgage
The 30 year mortgage is just one of many choices
in the real estate loan market. Rebecca Nichols,
a loan officer with Breakwater Mortgage in
Virginia Beach, says, “It’s not so popular
anymore to do a 30-year fixed loan. People want
options to help them get the most value from
their investment. Some want to pay lower monthly
mortgages so out-of-pocked expenses are less.
There’s no real reason anymore to be locked into
a 30 year amortized loan.” Rebecca pointed out
that in the beginning of the loan stages, most
consumers are paying off the interest anyway.
A Twelve Mat Loan
This popular loan is based on the treasury
market index, which is usually lower than the
prime rate. For the first year the mortgage is
at 1% interest. After that, it’s usually a loan
that is 3-5%. Some advantages of this type of
loan include a choice between three different
types of payment plans: minimum payment,
interest only or principal and interest.
Interest Only Mortgages
One new trend in mortgages that is very popular
right now is interest only loans. The buyer may
elect to make lower payments for two years, five
years, or ten years.
Adjustable Rate Mortgage (ARM)
Generally, a homebuyer is locked into a certain
interest rate for a 3-year period with an ARM
loan. After this the rate fluctuates with the
prime rate. Rebecca Nichols, a mortgage broker,
says, “I usually recommend people commit to an
ARM rate for 3 years. When the value of the home
has gone up, I recommend they refinance into a
30-year fixed mortgage or another ARM, depending
upon whether they want to stay in the home.”
There are interest only ARM loans available too.
These loans are popular with real estate
investors because the mortgage is easier to
cover if they lack a tenant for several months.
Interest only ARMS often homebuyers will be able
to obtain a bigger house or something closer to
what they want with an ARM.
80/20 Combo – Fixed or ARM
Some clients prefer to avoid paying mortgage
insurance, which is not tax deductible. If this
is their preference, Nichols recommends “finance
80% of the loan in one loan, and 20% in another.
ARMS can also be split this way.
30 Year Fixed Mortgage
If you plan on residing in the same home for at
least 20 years, this is the perfect way to go.
It’s a standard, fixed rate for the whole loan
duration.
Remember to shop for a mortgage, just as you
would for auto, home, health insurance, or auto
loans. Be wary of obtaining your lender on the
internet. Some sites may promise rock bottom
interest rates, but the hidden costs and fees
can add up. Also, having a lender present at the
closing is an invaluable resource to the
homebuyer. The loan officer or mortgage broker
should be present to make certain the loan
documents are correct and answer questions. A
lender on another coast is probably not going to
provide you with this type of service.
If you’re in the market for a home and a
mortgage, choosing the right lender will help
you get more bang for your buck and the type of
dwelling you desire.
This article is the property of
www.1st-in-homeloans.com, which has been
offering home mortgage services since 2002. To
find out more visit
www.1st-in-homeloans.com
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