More Bang for Your Buck With Mortgages
by Elaine Voncannon
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 Month 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.
Elaine VonCannon is a REALTOR with
RE/Max Capital in Williamsburg, Virginia, and she specializes in
retirement and relocation in the Williamsburg area. She is an
Accredited Buyer's Representative as well as a Senior Real Estate
Specialist. Elaine VonCannon also works with real estate investors and
home sellers.
Elaine Voncannon may be contacted at http://www.voncannonrealestate.com
or vonmor1@cox.net
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