Pros And Answers : Choosing The Best Loan?

Home ownership is the American dream! It is one of the most costly purchases an individual or family can make in their lifetime. Some people save until they have cash to purchase however, many people borrow money from a bank or lending institution; when a person borrows money to purchase a home the loan is called a mortgage. The lender is called the mortgagee and the borrower is called the mortgagor; banks have several different types of mortgages: fixed rate mortgage, adjustable rate mortgage, investment mortgage and much more. Borrowers have to undergo the lender underwriting process to show financial capability of repaying the mortgage (Makarov & Plantin, 2013). In this article I will use a fictitious person named “Julianna,” she is in the process of buying her first home at age 30; I will be her lender and will use mathematical procedures to find out what is her down payment, principle, installment payment, points (closing cost), mortgage maturity value and total interest paid.

Based upon the equity in your home, the lender makes a loan regardless of whether or not you can afford the monthly payments. If you are not able to make payments, you will then be at risk of losing your home through foreclosure. This type of practice slowly drains money from savings, removing the joys of homeownership which in the long run, leads to foreclosure.

Adjustable-rate mortgages: in simple terms, an adjustable-rate mortgage is when the interest on a loan changes with the market. This sounds nice if the interest rate is

b. A need-based federal loan with a lower, variable rate for those with high credit scores

The company’s products include different mortgage and loan types, with four main products in total. Quicken Loans offers both adjustable rate (ARM) mortgages and fixed rate mortgages. Adjustable rate mortgages are adjusted periodically and are determined on changes in a specific index. Interest rate caps are usually included on ARM loans, and these interests following the trends of one’s specific overall interest rates. Fixed rate mortgage loans are usually in fifteen or thirty year terms, with the borrower agreeing on a fixed payment each month that does not fluctuate. Conventional loans are loans not secured by a government sponsored entity, such as the FHA or VA. Conventional loans conform to the Freddie Mac and Fannie Mae product lines. FHA loans are backed by the Federal Housing and Urban Development Administration. These are the most popular loans for first time home buyers, attending to allow housing to become more affordable. They are limited to specific home types and home locations. Quicken Loans jumbo mortgage loans are always larger than the limits set by the Freddie Mac and Fannie Mae agencies each January, with the agencies purchasing the underlying securities from mortgage originators. Currently, the jumbo loans are offered at

After the bursting of the United States housing bubble, many homeowners found themselves in a dire situation. Following the dot-com bubble burst, the Federal Reserve slashed interest rates, meaning credit was cheap. Lower lending standards also meant that consumers with not-so-great credit were suddenly able to attain adjustable rate mortgages with a minimum of money down and easy initial terms. In 2004, approaching the pinnacle of the housing market’s climb, former Federal Reserve Chairman, Alan Greenspan, actually encouraged Americans to take out adjustable rate mortgages. Then, as 2006 came, Americans saw the housing market reach its peak and subsequently plummet downward. As a result, it became difficult to impossible forthe borrowers

This is when the first mortgage would be for financing the first 80 percent of the loan and the second mortgage would be for financing the remaining 20 percent of the loan. This would ultimately result in a higher overall cost than if you would have put down the 20 percent instead, because the rate will be higher on the second mortgage, not to mention the extra loan fees. Additionally, a 100 percent mortgage is automatically given a higher rate because you will be in the same high risk class as those who can't or didn't save enough money for a down payment.

A really small down payment: Many homebuyers save up for years before they can afford the down payment. With FHA loans, the down payment is only 3.5%. So, there is no need to wait for years, buy your home now.

The rate could be as low as three percent as opposed to the regular rate of ten percent, significantly reducing the initial costs. • Borrowers also benefit from having limited fees charged on their loan. One of such limitations is the fee for the loan origination that cannot go beyond one percent of the mortgage. However, borrowers are advised to be careful as many lending institutions try to make a fast move on their

3. The Wall Street Journal reports that banks already are pitching riskier loans that come with adjustable interest rates or allow borrowers to pull more

b) Balloon Mortgage: This loan is not fully amortizing. Instead the entire loan balance is due on the maturity date. An example of a balloon mortgage occurs when the payment is amortized over a 30 year period, but balloons in 10 years making the remaining unpaid principal balance due in 10 years. At the end of the balloon period, the borrower must find alternative financing to refinance the remaining balance. The terms of the refinance could potentially be less favorable or even worse; the borrower cannot obtain new financing.

No one really realizes the time and patience it takes to get a first time home buyers loan. The first and most critical step in homeownership is getting the right mindset. This principally involves

Dramatically decrease monthly mortgage payment and provide homeowners extra income to live each month. For example, a $575,000 mortgage at 6% interest rate is about $3,500 per month. The same loan at a 2% interest rate is approximately $2,100 per month.

Homes are typically the biggest purchases the average American will make in her lifetime. The average home mortgage requires a down payment equal to 20% of the purchase price. The remaining amount is paid monthly throughout the course of 30 years, on average. This makes the home mortgage a substantial and constant monthly expense for the average homeowner. (Egrungor & Zaman, 3).

If you have a 15-year mortgage, you are locked into a certain payment that will be higher than a 30-year mortgage of the same interest rate. But with a 30-year mortgage, you still have the option of paying more if you choose to. In fact, there are investment experts who claim that making a double payment early in a 30-year mortgage is a good, long-term investment. The point to remember is that you are less likely to be able to do this with a 15-year mortgage. The payments will simply be too high.