Home Real Estate Mortgages

Financing a home can be very tricky and confusing to many and can bring with it many risks that are difficult to see from the beginning. During the real estate boom I was a realtor and a mortgage consultant; many lenders were offering home buyers all sorts of mortgage programs with confusing term, they would do this to keep the purchaser confused just in hopes to entice the home buyer into getting their loan from them.  With all these weird mortgage deals it helped to cause the real estate melt down in 2008 Many people had no idea how their mortgage worked and all the crazy fees that were built into their mortgage, because of this many people walked away from their homes thus the

starting of the real estate meld down. This melt down caused the latest economic recession that we are still trying to come out of today. Back before the melt down lenders were giving away money on loans like it was candy. I went to a lot of mortgage closings as a mortgage closing agent and could not believe what people were signing, they had no idea what the terms of the loan were for, or they had no clue as to the thousands of dollars in closing fees that were rolled up into their loan. People would not read the documents, all they wanted to do was sign the forms and be done with the whole mortgage process.

Since the melt down lenders have gotten smarter and more conservative. Even today you need to be smart on finding a mortgage that works best for you and your family. You do not want to get yourself in over your head in debt in order to have that dream home you and your spouse has always wanted.  You want to be smart and get a home that is comfortable for you and your family to afford.

There are a lot of different types of mortgage programs out on the street even today after the melt down. Let’s take a look at some of the more common mortgage programs that you may want to consider when purchasing your dream home.

Fixed Interest Rate Plans

A fixed interest rate mortgage is a home loan that has an interest rate that does not go up or down during the life of the loan. The loan is amortized which means that the lender takes the total principle amount and adds in the interest that will accrue to give the lender a total figure. The lender then divides up the total amount into monthly payments usually 360 monthly payments if it is a 30 year loan.  The lender will front end load the interest which means that the majority of your early monthly payments go’s towards the interest that is due on the loan. Once a majority of the interest is paid then more of the portion of your monthly payment will be paid towards the principle. Your payments still remain the same from day one till the end of the mortgage.

Adjustable Interest Rate Mortgages

Adjustable interest rate mortgages sometimes called ARMs have interest rates that change from time to time. These mortgages can sound very complex and confusing but many homeowners find these mortgage plans very attractive. Fixed interest rate mortgages will have a little bit higher interest rate when signing the mortgage papers where ARMs will have a lesser interest rate in the beginning to intice home buyers to purchase them over a fixed rate loan.

Lenders create these loans based on an index number which is essentially a measure of money current value. The value of money goes up and down and these ARMs allow lenders to respond to this increase of decrease of the value of the money. If you are looking at an ARM take a look at the terms of the loan, lenders will have a low interest rate in the beginning of the loan, this rate will be locked in from three to five years. After this fixed rate of time has expired the rate of your loan may go up a few percentage points. But don’t get scared, these ARMs always have a cap which prevents rates from jumping to high.

Interest Only Mortgage Plans

These hybrid loans I do not care for. They are very confusing because the lender take parts of a fixed interest rate loan and parts of an adjustable rate mortgage to make these loans attractive. These loans are usually for home buyers on a tight budget. They allow the borrower to make payments towards the interest part of the loan for the first few years. This allows the purchaser to make lower monthly payments at first in order to adjust their budget to start making larger payments which will go towards the principle.

Assumable Mortgage

You may come across a property that has an assumable mortgage on it. This is where an owner of a property can sell you the property and you can take over his or her mortgage. There can be several issues with these loans so make sure that you have an attorney review and explain all details and drawbacks that you may inquire from these types of mortgages.

Conclusion

Mortgages and home financing can be difficult and time consuming. Knowing the basics before you get started can save you a lot of frustration and sleepless nights. Take a look at your budget  and your finances and know where you stand today and in the coming years and then take action and find a mortgage program that suits your family’s needs. Again don’t go overboard,  find a mortgage program that you and your family can comfortable afford.