| As expected, buying a home for the very first time | | | | escrow closes. |
| can be quite stressful, especially if you are not familiar | | | | Fixed Versus Adjustable Mortgage Rates |
| with the entire process. Hopefully the information | | | | Which rate to choose is basically up to the buyer, for |
| below makes you a little more knowledgeable in the | | | | neither one is "better" than the other. However, one |
| specifics, as it is useful in obtaining a better offer when | | | | may be more integral to a buyer's needs. If the |
| you are applying for a mortgage. | | | | borrower wishes to have an interest rate that is slightly |
| Mortgages: The Basics | | | | higher than normal, but assured that the payments will |
| Generally speaking, a mortgage is the money | | | | be consistent in value, then a fixed mortgage rate is |
| borrowed from the lender that is used to buy a house. | | | | the way to go. On the other hand, if the buyer prefers |
| The cost of borrowing this amount of money is | | | | to have a low interest rate upon agreeing to the terms |
| represented by the interest rate. You can typically find | | | | of the loan and is willing to risk an increase in future |
| lenders anywhere, especially since the mortgage | | | | payments, the adjustable mortgage rate would be a |
| industry has expanded given the increase in property | | | | good choice. |
| availability. The combination of investors seeking a high | | | | You may even be able to find a lender who is willing to |
| return and the government pushing the "American | | | | somewhat combine the two types of rates, meaning |
| Dream" ideal has led to a great influx of money into | | | | something in the middle of the road that ends up |
| the mortgage business. | | | | working better under the circumstances. |
| Mortgage lenders come in many different forms. They | | | | Points on a Loan |
| can be public or private companies, private investors, | | | | A point is equal to one percent of the principal amount |
| and banks, just to name a few. To find a suitable | | | | borrowed which is paid to the lender in return for a |
| lender, you can contact a mortgage broker who will | | | | reduced initial mortgage interest rate. For instance, if |
| help you conduct your search and match you up with | | | | you are borrowing $500,000 and are required to pay 2 |
| a lender who best suits your situation. An alternative | | | | points, then you would have to pay the lender $10,000 |
| approach is to do your research and shop around by | | | | to lower the interest rate. |
| yourself. A quick and easy way to do this is via the | | | | Just because paying points entitles you to a lower |
| internet. There are numerous websites for you to | | | | interest rate, you still may end up paying more money |
| browse at your disposal, and it is important to | | | | by choosing this route. It is important that you carefully |
| remember that the terms and policies of a loan offer | | | | calculate each scenario so that you can decide which |
| are for the most part malleable. That is, you can | | | | option will save you the most money in the long run. |
| always negotiate more beneficial terms, so never | | | | The Loan-to-Value Ratio |
| accept an initial offer. | | | | This ratio determines the amount of money you are |
| Process Length | | | | able to borrow against the property value. In other |
| The entire process of applying for and agreeing on a | | | | words, the amount borrowed is a percentage of the |
| mortgage negotiation takes somewhere between | | | | value of the property. As an example, suppose your |
| thirty and ninety days. This number is based upon a | | | | property is valued at $750,000, and the principal |
| few variables, such as the nature of the lender and | | | | amount of your loan is $500,000. The loan-to-value |
| the property situation. It is important to note, however, | | | | would be about 67%. |
| that the actual process of shopping for and tracking | | | | Typically, lenders do not like to loan more than |
| down the right lender may take weeks if not months. | | | | approximately 80% of the market value of the |
| Home buyers with good credit may stumble upon | | | | property. However, there are certain lenders, called |
| favorable terms more quickly than those with a poor | | | | sub-prime lenders, who will let a buyer borrow a |
| financial report. Another important factor to consider is | | | | loan-to-value of 100%. This is recommended if your |
| the availability of the property. To make things easy on | | | | credit report is not as noteworthy as you would like. |
| oneself, it is wise to construct some sort of timeline so | | | | Do some research to see if you qualify to be |
| that you can save enough money for the time when | | | | approved for a sub-prime loan. |