The mortgage industry is laden with technical terms. Don’t be intimidated. This short guide will take the mystery out of the jargon and help keep you focused on buying your new home.
Fixed Rate Mortgage – This is the best option if you plan on living in your home for a long time. This is a most typical type of rate and it’s quite simple: a fixed interest and payment for the life of the loan. Very predictable. The term (length of the loan) is typically 30 years, but many people opt for shorter terms of 15 years and even lower. Your personal goals play a factor on deciding the term. Of course, the shorter term will cost you more on a monthly basis, but you will save time and interest over the length of the loan. Consider your monthly income and expenses when deciding on the term and other factors such as savings and rainy-day funds. A good rule of thumb is when interest rates are low, try and lock in a fixed rate mortgage.
Adjustable Rate Mortgage – Referred to as ARMs, these rates have a fixed rate for s a preset number of years, normally three to ten years, then then the rate adjusts with the market. There are inherent risks with ARMs of course. You’d opt for an ARM if you plan on moving or selling your house withing the initial period, but once that period is over, you may end up paying more interest. So why opt for an ARM? Well, ARMs tend to have lower interest that fixed rate mortgages. Again, if your plan is to be in for a short time this is an excellent option.
First-Time Assistance Programs – Almost every state has programs specially targeted to first-time home buyers. These are catered to buyers who may not normally qualify for a loan or have other hardships. The help with education, closing fee payment, down payment grants, and more. The U.S. Department of Housing and Urban Development (HUD) lists the programs for all he states on their site. The direct link for Florida is here and the rest of the states is here.
Loan Programs – The loan programs outlined in Mortgages 101 are available to all homebuyers. Many people are under the impression that FHA loans are only available to first-time homebuyers. FHA loans are available to anyone as long as they haven’t owned a house in the past three years. And many state and local agency programs are also available to people regardless if this is their first purchase or not.
Insider Tips –
- Your credit score is one of the most influential factors in rate and approval. Subscribe to one of the many free credit monitoring services like Credit Karma and keep an eye on your score and get it up and keep it up.
- Additionally, work with a mortgage broker FIRST before your real estate agent and get a pre-approval letter. Having a pre-approval letter in-hand will help you negotiate with the power of cash. When a seller and their agent know you are pre-approved, things change in your favor.
The Wrap-Up – Buying a home, for many of us, is the largest financial commitment of our lives. And having some understanding of the mortgage world is important. Education is key. Additionally, you should work with a mortgage broker who you trust and feel comfortable working with. Transparency is key. The team at MOR Lending has put over 50,000 people in homes and funded billions of dollars in loans – one client at a time. We highly recommend giving them a call for your mortgage needs. Their 5-star ratings are not by chance.
