|Don't make a $10,000 mistake! Sometimes, the lowest 30 year fixed rate mortgage could cost you thousands of dollars too much. We will make sure you are informed about the critical factors so you don't waste any of your hard earned money. How long will you have the mortgage? What other investment options do you have? What about current tax considerations. Planning to relocate sometime in the future? Is an inheritance on the horizon? Your answers to these and other questions and the info we will supply will help you make the best choice of mortgage options. Well informed, you will be able to choose the mortgage that is right for you. |
- Fixed-Rate Mortgages
- Adjustable Rate Mortgages
- The Convertible ARM
- Balloon Mortgages & Interest Only Loans
- FHA , VA & USDA Loans (Government Loans)
- Down Payment Grants
- First Time Home Buyer Programs
- Heros Program (Police, firefighters, teachers and health care workers)
If your income is going to be stable or increase slowly, payments that will remain essentially unchanged over time could be your better options. If you plan to stay in your new home for a long time, a fixed-rate mortgage or home loan may be right for you.
With a fixed-rate mortgage, the interest rate you pay won't change. The monthly principal and interest payments are locked in from the outset and will not change throughout the term of your home loan. When you choose a fixed rate home loan, any increase in income you realize in the future eases the burden of those payments. You are protected from rising interest rates. Budgeting for the future is uncertain with adjustable rate loans, not so with the fixed rate mortgage loan.
If interest rates are historically high and expected to fall, like the period between 1981 and the present, fixed rates prove too expensive and almost force a borrower to refinance. That main advantage of a fixed-rate mortgage is that once your rate is set, it does not change. In the falling rate scenario, you continue to pay the starting rate and don't get the benefit of lower interest rates. While you do have the option of refinancing if interest rates drop significantly, that cost money. So we will provide information relative to future rate forecasts to enable you to make a smart choice.
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|Adjustable-Rate Mortgages (ARMs) |
The adjustable-rate mortgage (ARM) is not popular currently, but definitely can prove to be a smart choice in certain circumstances. We offer only those loans with reasonable limits to the increases of interest rates and payments. We offer no loans with negative amortization! Our clients' financial security is a primary consideration for us!
As we mentioned, these mortgage loans can be your best home loan choice if you're buying a home while interest rates are high, if you expect increases in your income. Another situation in which an ARM can work for you is one in which or if you don't plan to keep your home long. We will detail the potential increases in rates and payments so that you understand fully what risk you are taking on the rise or fall of interest rates.
In most cases, the initial interest rate of an ARM is lower than a fixed-rate mortgage. While this is generally just a “teaser” to motivate some borrowers to assume some interest rate risk, the teaser period does help some borrowers reduce the cost of owning a home for a while. Maybe they need a couple years until a child graduates from college or until Mom goes back to work. Maybe they know a job transfer is certain. Some borrowers can reasonably expect inheritances or gifts making the adjustable rate home loan a smart choice.
With an ARM, your mortgage rate rises and falls with interest rates. Generally lender's interest rates are tied to a specific public index that they don't control. Two of the more popular indexes are Cost of Funds or COFI, London Interbank Offered Rate or LIBOR, the Weekly Average Yield on Treasury Securities Adjusted to A Constant Maturity Of One Year or T-Bill rate. These rates are driven by economic conditions beyond your lender and are publicly available. If you consider one of these home loans, we will ensure you know the historic behavior of each Index.
The rate you pay will be based on your index plus the lender's margin. Margins vary and again we can show you the data on competitive margins. We will provide your loan's specifics/. Part of the information we provide is what the "caps" on your home loan each year and over the life of the mortgage loan. "Caps" ensure your safety by limiting the amount your lender can increase your interest rates,
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Some ARMs offer an option to convert the ARM to a fixed rate loan. This is a popular option, but the devil is in the details. You must know when and how you can convert and how much exercising that option will cost you. It can be another level of protection against rapidly increasing interest rates. That's when our decades of experience and nationwide network of lenders help you avoid expensive mistakes.
The Hybrid Mortgage
Some of our lenders offer Hybrid Mortgages. This is a home loan with a fixed interest rate and payment for a period of time up to 10 years after which it becomes an adjustable rate mortgage. The home loans we offer have limits to the increases in payments and interest rate. These mortgages offer the benefits of lower interest rates for the first few years and limited future increases. In many cases these loans are a superior choice for some borrowers.
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|Balloon Mortgages and Interest Only Mortgages |
Balloon mortgages, so-called because it requires you to pay off your loan in full or refinance at some point in the future before the balance is fully amortized. The advantage of a balloon mortgage is generally lower rates and costs than for a traditional 30-year fixed-rate mortgage.
Balloon mortgages are commonly popular with home buyers with growing families and with individuals who expect to be relocated by the employer. Those anticipating a moving in five to seven years can take advantage of lower interest rates for that time period. The catch is that If they end up staying longer than anticipated, they have to pay the balance at the end of the term, or more likely, refinance the mortgage. Rates may be considerably different five to seven years in the future. Some home loans offer an option that allows you to convert to a current fixed or adjustable rate mortgage, provided certain conditions are met.
In purchase situations, down payment requirements can be higher for balloon mortgage loans than for fully amortizing home loans.
Interest only loans are also available. These loans require the borrowers to pay only interest for the first few years of the loan. After the initial interest only period, the loan balloons or payments adjust and the loan amortizes completely over the remaining term of the home loan. Lower initial payments are the primary benefit of interest only home loans.
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|FHA, VA and USDA Loans (Government Loans) |
By far the most popular loans for home buyers, particularly first time home buyers are government loans. These include FHA and VA loans which are referred to as government loans. Also popular are USDA loan a cousin to the FHA and VA home loans. The government loans are popular primarily because they reduce or eliminate down payment requirements for buyers. Down payments prove to be the biggest obstacle for otherwise qualified home buyers.
Veterans of the armed forces may qualify for Veterans Administration mortgages or VA Loans. These loans require the veterans to have no down payment when buying a home. There are some caps that apply to VA loan guarantee which can limit the size of loan available to the veteran. One fantastic feature of the VA loans is that borrowers do not pay mortgage insurance premiums on these loans, resulting in much lower payments. Call us for details about those limits.
FHA (Federal Housing Administration) loans have helped more Americans achieve home ownership than any other type of loan. Most average homes are eligible and in most cases the borrowers only need a 3.5% down payment. Borrowers do not have to be veterans, down payments can be gifts or grants. These are fantastic home loan programs, call us to see just how much home you can buy!
USDA (US Department Of Agriculture) loans are similar to FHA and VA loans in many respects. They require no money down and are a fantastic program for first tie home buyers. Properties in suburban and urban locales are generally not eligible for these loans. Income limits apply, but many average families qualify to buy homes with this program. Call me to see if your income and the property you want are eligible for this program.
OHFA, the Ohio Housing Finance Agency, offers special financing for first time home buyers, down payment grants, special programs for teachers, people in law enforcement, firefighters and certain health care industry workers. Call me for details on these terrific programs.
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