| Buying a home for the first time can be a little rattling, | | | | needs. The rates alone are not better than the other. If |
| as it is a huge financial investment and responsibility | | | | the home buyer wants a slightly higher interest rate, |
| that will stay with you for years. If you are not familiar | | | | but steady payments every month for the life of a |
| with how to buy a home and get a mortgage, then | | | | loan, then a fixed rate mortgage is the way to go. |
| use this information to get a little insight as to what a | | | | There will be no fluctuation of interest rate and |
| mortgage is, and how one is obtained. | | | | therefore payments are constant. |
| By understanding the basics of a mortgage, you are | | | | If the home buyer wants to take a lower interest rate |
| more likely to get a better deal and mortgage that | | | | in the beginning, with the chance for the payments to |
| best fits your financial profile. | | | | be higher or lower based on the current market rate, |
| Question 1: What is mortgage and where do you get | | | | then the adjustable rate mortgage is the way to go. |
| one? | | | | Depending on the terms, the interest rate will either be |
| Answer 1: A mortgage is a conveyance of or lien | | | | higher or lower than the initial rate, depending on the |
| against property that is terminated upon complete | | | | current market rate every few years or so. The |
| payment according to pre-determined terms. More | | | | payments could potentially change drastically and the |
| simply, a mortgage represents the money you borrow | | | | home buyer needs to be aware of this risk. |
| from a lender in order to purchase a house. You must | | | | There are many other rate structures and mortgage |
| pay interest on the money borrowed in return for | | | | lenders have gotten very creative by combining |
| having borrowed the money in the first place. | | | | different types of mortgages and rates. Ask your |
| You can find mortgage lenders everywhere, as the | | | | mortgage lender for other options than just your basic |
| mortgage industry has greatly increased as there are | | | | adjustable and fixed rate mortgages. You may find |
| more opportunities for people to buy property. More | | | | something that would work better for your situation. |
| and more money is being circulated through this | | | | Question 4: What are points? |
| market because of two reasons. One, investors | | | | Answer 4: Points are a percentage of the principal |
| recognize the opportunity for a high return on | | | | amount of a mortgage that is paid upfront to the |
| investment through mortgages. And two, the | | | | mortgage lender in exchange for a lower initial interest |
| government is pushing for the ability for every | | | | rate. For example, if your principal $200,000 and you |
| American to be able to live the "American Dream" and | | | | are asked to pay 1 point, then you would pay $2,000 |
| purchase a house. | | | | to the mortgage lender. |
| Mortgage lenders can be private investors or | | | | You must calculate the different scenarios with out |
| companies, as well as public companies, commercial | | | | without points, because sometimes is disadvantageous |
| banks, and other financial institutions such as a credit | | | | to pay points and get a lower interest rate, because |
| union. There are mortgage officers and brokers that | | | | you still end up paying more with the points than you |
| can aid you in finding a good mortgage from a qualified | | | | would with a slightly higher interest rate with no points. |
| lender. You can also shop mortgages yourself by | | | | Generally, points are a way for mortgage lenders to |
| calling different institutions and asking for their rates | | | | make profit very quickly and upfront. Do your |
| and terms. | | | | homework before you agree to any terms so you |
| If you go online, there is a myriad of websites that will | | | | don't spend more money than you have to. |
| shop 4-5 lenders for you all at once, so you can get | | | | Question 5: What is the loan to value ratio (L to V |
| an idea as to the mortgage you could qualify for. | | | | Ratio)? |
| Finding a good mortgage will take time and energy, | | | | Answer 5: The loan to value ratio is used to determine |
| especially if you shop around, which is highly | | | | how much money you can borrow on the property. It |
| suggested. Remember that terms are negotiable, so | | | | shows the amount borrowed on the property as a |
| don't take the first offer you get. | | | | percentage of the total current market value of the |
| Question 2: How long does the mortgage process | | | | property. For example, let's say your property is worth |
| take? | | | | $500,000, and you have a loan principal amount of |
| Answer 2: The actual process of applying for a | | | | $350,000. You would divide your loan amount |
| mortgage and closing takes anywhere from 30 to 90 | | | | ($350,000) by the current market value ($500,000) and |
| days, depending on the mortgage lender and the | | | | you get 70%. The loan to value is 70%. |
| situation with the property. It may differ slightly from | | | | Mortgage lenders usually do not loan more than 80% |
| case to case, but generally, this is how long it takes. | | | | of the current market value, and they use this in |
| However, you may take weeks, even months | | | | addition to your financial profile to determine how much |
| shopping for a lender that is best for your situation, | | | | you can actually borrow as well as pay back in full and |
| depending on what it is you need to buy the house. | | | | timely manner. |
| Those home buyers with a good financial profile may | | | | There are mortgage lenders, known as sub-prime |
| find good terms more quickly then those with poor | | | | lenders who will let a home buyer borrow 100% of the |
| financial profiles. Also, it depends on when the property | | | | current market value, as well as a little more to help |
| will be available, moving times, perhaps a contingency | | | | with closing costs. There are also many government |
| like the sell of another property for the seller etc. It is | | | | programs and other options that allow home buyers to |
| important to create a timeline for this process by | | | | purchase property with little to know down. Investigate |
| assessing both your needs as well as the mortgage | | | | these options to see if they would allow you to get |
| lender's needs. You so not want to cut things too | | | | into a home if your financial profile is not so good. |
| short, or be without money for the close of escrow. | | | | There are options for everyone, so do some research |
| Question 3: What mortgage rate is better: fixed or | | | | and get all of your questions answered so you are |
| adjustable? | | | | educated and prepared when moving into the |
| Answer 3: Whether or not one mortgage rate is | | | | mortgage process. |
| better than another is really up to the home buyer's | | | | |