4 Things Home Buyers Should Look Out for With Mortgage Rates on the Rise

Mortgage Rates RisingBuying a home is something that most people hope to achieve in their lifetime. Owning the home that you and your family live in gives you a sense of security that you don’t normally get if you are renting or living with your parents. When you own a home, you can customize it based on your preferences, improve it, and more. Unfortunately, there are many factors to consider when buying a home, especially if it’s your first time. (Read: Current Interest Rates for Home Loans – Is it Time for You to Apply?)

Unless you have a perfect credit score and a very good income, qualifying for a mortgage will prove to be fairly difficult. There is always the chance that you will qualify for less than you need, or even be rejected because of your low credit score or for being unable to prove to your lender that you are not a high default risk. Once you get passed the approval process, you will find out that the initial cost of a mortgage is very high, and will probably require you to spend all your savings at once. Between the down payment and the closing costs, you are looking at tens of thousands that you will have to spend before you can even move into your new home.

The Mortgage Interest Rate

Besides the price of the home, there are other aspects of the mortgage which will determine how much money you will be spending. One of the most important aspects of a mortgage loan is the interest rate. Mortgage rates fluctuate frequently, and make a huge difference in how much money you will be spending on your mortgage loan.

Qualifying for the best interest rate requires you to have a perfect credit score, a large income, and make a large down payment. The interest rate will also be affected by how long the loan repayment period will be. With a longer term, your monthly mortgage payments are lower, but the interest rate will be higher. If you choose a shorter term and can afford to make much larger monthly mortgage payments, then your interest rate will be lower. By being a perfect borrower and choosing a short term, you can influence your mortgage interest rate (Read: Mortgage Rates Forecast Vs. Home Mortgage Rates Today).

But there are other factors, which are out of your control, which have a larger effect on interest rates. The biggest influence on mortgage rates is the national economy. A rapidly growing economy will cause inflation, which will cause the Federal Reserve to attempt raising interest rates in order to slow down the economy. When the economy is struggling, the Federal Reserve will usually reduce interest rates in order to stimulate the housing market. Also, when there is a large number of new mortgage loans being originated, investors tend to avoid purchasing these loans, so interest rates are increased.

What Buyers Should Keep in Mind When Interest Rates are Rising

Rising interest rates usually make home buyers think twice before buying a home, or even give up on buying a home. Higher interest rates make buying a home more expensive, so many home buyers might get discouraged. However, in this economic climate, there are some things that you should keep in mind when buying a home, even when interest rates are rising.

#1 – Demand for Houses Will Be Higher

Mortgage interest rates are rising because the economy is strengthening, so buying a home right now is not such a bad idea. Rising interest rates mean trouble when they are rising on their own, but, if they are doing it together with the strengthening of the economy, it means that the demand for homes will still be high. So buying a home before interest rates increase even more is actually a good idea. Follow this link to read more.

#2 – A Lower Inventory

Buying a home before interest rates increase more may be difficult because inventories are low. This may be a problem for many buyers who are looking to buy a home right now, before an even larger increase in mortgage rates. The economy is recovering, so there is a large demand for homes, but inventories are pretty low, so the chances of finding a home that will suit your needs are slim. Statistics show that most home buyers worry about not finding a home that they like more than they worry about the rising mortgage interest rates. To read more about the effect of this on the housing market click here.

#3 – Looser Qualification Requirements

Qualification requirements are still fairly strict. Rising mortgage rates are a small problem if you are unable to take out a mortgage loan in the first place. Lenders are trying to protect themselves more than ever from giving out loans to borrowers who are a high default risk. Fortunately, because interest rates are increasing, refinancing will slow down, so lenders will, most likely, loosen their requirements for home purchase lending in order to attract more home buyers. Recently, when interest rates were near record lows, lenders were making most of their money from the large increase in refinances, but, with increasing mortgage rates, the number of refinances will start to decrease significantly.

#4 – Renting is Still More Expensive

Don’t think that, because interest rates are rising, renting will be cheaper. Buying a home will be more and more expensive than before when interest rates are increasing, but renting will still remain the more expensive option, unless mortgage interest rates rise to over 10 percent (Read: Take Advantage of Today’s Historically Low Rates).

Rising mortgage rates will make home ownership unattainable for some people, but time can be a bigger enemy. Waiting for interest rates to decrease can be a big mistake, because it may never happen and you will be losing money by renting instead of buying. On the bright side, rising mortgage rates will strengthen the economy and allow more people to qualify for a mortgage.

Current Interest Rates for Home Loans- Is it Time for You to Apply?

Current Interest Rates for Home Loans- Is it Time for You to Apply- 150x150Mortgage interest rates were at a record low last year and have slightly increased since then. This seems like the perfect time for you to become a home owner. The housing market struggled to recover for the past few years, but it seems that it is on the right track now.

Whether you are looking to buy a new home or your home has lost some of its value over the last few years, making it impossible for you to refinance, it looks like 2013 is the year when the home buying activity will see significant increase, making it the perfect time for you to buy a home.

Current Interest Rates

Current mortgage rates today for mortgage loans are around 3.5 percent for a 30-year fixed-rate mortgage. This rate is pretty close to last year’s historic low of 3.31 percent, but it is still a very low rate, that you should take advantage of.

The housing market is recovering, with home prices slowly increasing, and inventory decreasing more and more. The building industry is also slowly recovering, but they aren’t able to satisfy the demand for new homes yet.

Because mortgage interest rates are currently low, you will pay a lot less over the life of your loan. This makes current interest rates for home loans very attractive to home buyers, which will most likely lead to a rise in mortgage interest rates in the near future. Some economists predict mortgage rates as high as 4.4 percent by the end of the year.

Should You Apply for a Mortgage Loan?

Mortgage interest rates are low right now, but so are home prices. Statistics indicate that prices for homes are rising, and could go up by as much as 5 percent in 2013 only.

Many industries are recovering from the economic crisis, which will result in a decrease in unemployment rates, creating more and more home buyers. Also, new construction is on the rise, as the builders are starting to regain confidence. New homes will see, according to predictions, a 20 percent increase in 2013.

With mortgage interest rates near historic lows and the economy recovering, this may just be the perfect time to buy a home. If you decide to wait for lower prices and interest rates, you could end up having to pay a lot more for a mortgage loan. These are just predictions, but common sense also dictates that mortgage interest rates should not go lower than they were last year, especially since they have already started to rise since the beginning of 2013. Ultimately, it is up to you to do your homework, read the facts and the predictions, and decide if this is the right time to become a home owner.

Jumbo Loan Rates vs. Conventional Home Loan Interest Rates

Jumbo Loan Rates vs. Conventional Home Loan Interest Rates- 150x150Huge and expensive luxury houses usually come with equally large mortgages, so lenders are offering a type of loan that enables home buyers to have access to higher loan limits than they would with a conventional loan. This loan is called a “jumbo loan” and it is designed to help home buyers who are in the market for a very expensive and luxurious home. Depending on many factors, such as size, materials used in construction, or location, some homes have bigger prices than the majority of homes in the United States, and can’t be purchased by securing a conventional mortgage loan.

What is a Jumbo Loan?

Jumbo loans are nothing more than larger mortgage loans. The government has imposed lending limits for most home loans, making it impossible to buy a more expensive home through conventional mortgage loans.

Loan limits in most parts of the country are usually in the $400,000-$600,000 range. Anything over that limit is considered a jumbo loan. Jumbo loans can exceed $1,000,000, but they are much harder to obtain than conventional loans. Qualifying for a jumbo loan is significantly harder than qualifying for a conventional loan, especially if your credit score is less than perfect.

Jumbo Rates Compared to Conventional Rates

The sales of properties that are worth more than $750,000 have increased over last year by over 35 percent. The number of properties sold for $1,000,000 and over has also increased by over 25 percent compared to 2012. The jumbo loans market seems to be recovering nicely after the big hit that it received a few years ago, when many lenders stopped offering this type of loan.

The difference between current mortgage rates on conventional mortgage loans and jumbo loans has narrowed lately, making jumbo loans more appealing. Interest rates for a 30-year fixed-rate mortgage loan that conforms to the government limits were 3.75 percent in April, while rates for jumbo loans were only 3.85 percent.

After being raised in 2008 in order to stimulate the housing market, limits for jumbo loans were lowered in many states in 2011. If limits for conforming mortgage loans are lowered, then home buyers have to take out bigger jumbo loans to be able to buy a home with the same price.

Interest rates for jumbo loans might be as low as rates for regular mortgage loans, but the requirements are stricter. Depending on your financial situation and credit score, getting a jumbo loan this year could possibly be the best choice for you. If you can prove a large income, perfect credit score and you are able to provide a fairly large down payment, then a jumbo loan can be your opportunity to purchase the luxury home of your dreams.

What is Mortgage Amortization?

What is Mortgage Amortization- 150x150Mortgage amortization is the systematic repayment of calculated interest and principal over a previously determined period of time. Basically, it is the process of repaying a mortgage loan through monthly payments. During mortgage amortization, the principal on a mortgage loan declines, as the borrower makes monthly payments. Each time a payment is made, a part of it goes towards reducing the principal, and another part of the payment goes towards paying the interest on the mortgage loan.

The Mortgage Amortization Process

When you take out a mortgage loan, the lender sits down with you to determine your monthly payments over the life of the loan. These payments must be something that you are comfortable with, that you can fit in your budget. These payments must be made on time and, more importantly, in full, including the interest and a portion of the principal, in order for the mortgage to amortize. When the mortgage loan is paid off, your mortgage is fully amortized.

In case the mortgage amortization is not happening, the lender must adjust your monthly payments, so that you are paying against the principal. This might make your monthly mortgage payments increase suddenly, which may cause financial issues.

When mortgage amortization starts, in the early years of paying off a loan, most of the monthly payments that you will make will be applied to the loan’s interest, and only a small percentage will go against the principal. As more of the principal is paid over the years, the interest starts to go down, which will lead to a much faster mortgage amortization in the later years of the loan. As a result, the equity that you will have in your home will also increase faster.

When using an online mortgage calculator, it is harder to figure out how much money you will be paying over the life of the loan. Online mortgage calculators use data such as your down payment amount, the total amount of your loan, and your interest rate to give you an estimate of how much your monthly payment will be, but they won’t help you figure out the total amount that you will be paying by the time your loan will be paid off. High interest rate loans and long mortgage loan terms can result in you paying thousands more on your mortgage, sometimes even double the original loan amount.

How to Calculate a Mortgage Amortization

Both fixed-rate and adjustable-rate mortgages fully amortize at the end of the term, whether it’s a 15-year adjustable rate mortgage or a 30-year fixed rate mortgage, with the condition that monthly payments are made on time.

To calculate a mortgage amortization, you need to have knowledge of a few key factors that are involved in your mortgage loan, such as the periodic interest rate and the loan balance. To find out the first month’s interest rate, you must multiply the loan balance by the interest rate. To find out the principal, you must subtract the interest from the total payment. To find out the interest and the principal for the next month, subtract the previous monthly payment from the mortgage loan balance, then repeat the steps described above.

The Amortization Schedule

The amortization schedule is a table that presents each payment from a mortgage in detail. Amortization schedules are generated by amortization calculators, and they show how much of each monthly payment is the interest and how much is going towards the principal balance. While a payment goes towards paying both the interest and the principal, the exact amount varies, and needs to be calculated with an amortization schedule.

When shopping for a mortgage loan, make sure you fully understand the mortgage loan process, your rights and what is expected of you. Various online mortgage calculators can be of great help, but always be aware of the lender’s rules and conditions. Taking that extra precaution before deciding on a mortgage loan can save you a lot of money and hassle in the long run.

Top 10 Steps for Getting a Post-Bankruptcy Loan

bankruptcy- 150x150With the current weakening dollar and bad financial climate, many are losing their jobs and business owners are closing at the same time. And if you’ve lost everything and filed for bankruptcy, then you have to wait at least two years to get a loan. However, you get to qualify for 100% of the financing advanced once this waiting period is over and you’ve met the conditions set by the credit bureau.

Coming back from bankruptcy can be tough. Dealing with your low credit score when in financial talks with lenders and even car dealers can be difficult. The important thing is to get back on track and start moving forward. You have new credit history to build!

The Effects of Bankruptcy on a Victim

A bankruptcy is often a desperate measure taken to avert a desperate situation. Some of the negative effects of a bankruptcy include:

  • Low credit score. Bankruptcy is the leading action that kills one’s credit score for about 7 to 10 years down the line. However, this effect diminishes as this period nears the close.
  • Difficulty in qualifying for loans. Lenders are very sensitive to credit reports in an attempt to avert the risk of defaults. As such, it becomes very difficult for a bankrupt individual to qualify for a loan a few months after declaration of the bankruptcy. You can only qualify for low-amount and high-interest loans if you are lucky.
  • Difficulty in securing a job. Since many employers require you to furnish them with a credit report before being hired, bankruptcy makes it very difficult for one to land a job. Employers consider someone with a good credit rating as one who will not put the company in financial trouble.

On the other hand, bankruptcy offers some advantages:

  • A new financial regime. If you are successful in filing for a bankruptcy then you have the opportunity to start all over again as if nothing has happened before. This is a golden opportunity to rebuild financially; having learned from the past mistakes.
  • Higher credit rating. Your credit score can go below 400 immediately after a successful bankruptcy. However, as you now take a new turn of events with the previous mistakes in mind, you will likely have a higher credit rating than you had before the bankruptcy.
  • Cessation of creditor pleas. Once you file for bankruptcy, you start breathing again because the court stops all your creditors from calling you all the time, sending emails, threatening you, foreclosures and so on and so forth.

Getting A Post-Bankruptcy Loan

  1. Be patient for at least 2 years. Most mortgagors will not look at your application until at least 2 years after the bankruptcy. A few others have capped this waiting time at 3 years. This waiting period is a learning period during which you can make several decisions. For instance, you can circumvent this waiting period in case you are willing and able to remit the down payment straightaway or settle for a loan at a higher interest rate.
  2. Review your credit report. After a bankruptcy, you are desperate for a higher score which can help you to secure a mortgage or any other loan. Make an effort to improve your credit score by obtaining a free report from Equifax, Experian and TransUnion free of charge by visiting annualcreditreport.com and checking for any errors in the credit report. File complaints with the relevant credit agency to have your credit score corrected.
  3. Understand and adhere to bankruptcy conditions. As you plan to apply for a mortgage loan, understand the consequences of the bankruptcy. If you had filed for a Chapter 7 bankruptcy that wipes out all unsecured debts, then it affects your credit history for the next 10 years. On the other hand, a Chapter 13 bankruptcy that prevents a foreclosure will affect your credit history for the next 7 years. However, your credit score will continue to rise as you apply for more credit and make payments on time.
  4. Consider available alternatives. Usually, there are two options to select from. The first one is the traditional lender while the other is an online lender. A traditional lender requires your physical documents in order to make various comparisons—a time consuming process. If you need the loan approved rather quickly then an online lender would be a better option.
  5. Clean up the damage on your credit report meanwhile. What impresses a lender most is the effort that you are making to improve your current credit score. Making prompt payments of your bills and establishing a visible track record of income will help to improve your current credit score. This will not only increase the chances of qualifying for a loan but also qualifying for more money at lower interest rates.
  6. Pay all your current bills in good time. Since your credit score is badly damaged, you must clear all your bills and make any due payments in good time in an attempt to improve your payment history. If you have a credit card, use only a small percentage of the credit limit which you are sure you will manage to pay back when due. Borrowing and paying on time improves your credit score rather than having no activity on your credit cards at all.
  7. Amount of loan and interest rates may not be favorable. Bankruptcy jeopardizes the way lenders view your ability to repay. As you hunt for a mortgage loan, beware that you will qualify for relatively lower amounts at higher than average interest rates because you are considered high credit risk. However, the terms get better as the lender monitors how well you pay your bills post-bankruptcy.
  8. Hire the services of a mortgage broker. After bankruptcy, managing your personal financial services is usually very difficult. You can count on a mortgage broker during this time to help you through the process of searching for a new mortgagor. They will do all the paperwork for you and present the most suitable loan that meets all your requirements.
  9. Secure all the money for your down payment. The more you give as down payment, the lighter the burden you have in principal repayment and interest rate charged. It also shows the lender that you can manage your finances properly once again and secure income, so you will qualify for more credit. In most cases, you may not be able to raise the down payment money through your own efforts. That’s where assistance programs like grants, 401k, Neighborhood or Nehemiah comes in.
  10. Consider these three critical factors. First, the waiting period for a successful mortgage application after bankruptcy is 2 years. Note that this period is variable from one lender to another and the longer you wait, the higher your chances of qualifying for a loan with more favorable terms. Secondly, an application following bankruptcy must be detailed with your current pay slips, bankruptcy discharge papers, 2-year tax returns, and a summary of all your liquid assets, bank details and written explanations. Finally, if you don’t want your finances to be disclosed then you may opt to use the low-doc or no-doc mortgage approach.

The truth is that qualifying for a loan after bankruptcy is a pain in the neck. However, your efforts in improving your credit rating, persistence in rebuilding and patience as you pursue various options will pay off and get you back on track.

Securing the Best Mortgage Rates

secure best mortgage rates- 150x150Narrowing the field down to the most affordable rate options when purchasing a home or refinancing certainly can be a challenge. The process might appear difficult or tedious at first, but finding the lowest interest rates on a mortgage has become much easier through the use of a multitude of online rate calculators, which make comparison shopping across many lending sources both incredibly convenient, and just a click away. Also, utilizing spreadsheets to keep all of your information organized will make this process infinitely easier.

Tools and Tactics

Loan Calculators – While the mortgage rates displayed are not necessarily guaranteed, they allow good estimates to be tabulated with reasonable accuracy. The resulting quotes are formulated via a variety of factors such as funding amount, credit ratings, loan-to-value ratios, and loan types. These will vary from borrower to borrower, but will provide valuable information as a base-line template of affordability regarding interest rates.

Lender Comparison – After gathering the most appropriate and affordable list of lenders and their corresponding interest rates, employ a spreadsheet to track the rates, fees and costs into a comparison chart. Keep each factor or criteria for each loan source identical for accuracy. This chart can then be used to begin the dialogue with each individual lender for acquiring more competitive rates and closing costs among the list of choices.

Rate Negotiation – The concept or practice of acquiring numerous rate quotes and subsequent discussions with online lenders is not a time-consuming process. Each lender is anxious to accept the business, and will generally offer the best rates possible. The wisest tactic is to find an individual loan agent, mortgage consultant, or broker with sufficient authority to be bargained with to achieve the best rates. This information can usually be found on the online contact forms for each lending source.

Bear in mind that the interest rates offered are certainly limited to each lender’s flexibility or willingness to vary downward from the current loan rate, combined with the various fees and charges each lender will have regarding closing costs and loan origination. Whatever the outcome, the best mortgage interest rates will be well within reach.

Smart Strategies for Getting the Best Mortgage

best-mortgage-rates-todayWhen a potential home buyer sets out to purchase a home, the primary goal is to make it as affordable as possible, so securing a mortgage with the lowest possible interest rates, fees, and  closing costs will save the buyer thousands of dollars before and after they are handed the keys to the front door.  It  requires a bit of planning and preparation, as well as some knowledge about the application process as a whole to land the best deal. Following  these smart strategies below will assist in making  this a hassle-free experience.

Evaluate the Credit Scores– A good credit score can open quite a few doors toward getting the most affordable interest rates and loan choices. Check with the three credit bureaus to find out where credit ratings stand. Determine whether or not there is any incorrect or outdated information to adversely affect the score, and take measures to improve or eliminate any derogatory influences.

Find the Best Mortgage Rates– Spend as much time investigating all the available mortgage rates as is spent looking for the right home to buy. Banks and lending sources offer a wide range of rates and fees, on and off-line, and the best rates could save hundred of dollars on monthly payments, and thousands in closing costs and up-front fees.

Determine the Affordability Factor – To keep from underestimating the true costs involved with owning a home, it is wise to also factor in the costs above and beyond the monthly payment, which may or may not include the property taxes or homeowners insurance. Make good use of online mortgage calculators to determine the loan affordability based on monthly income and expenses.

Get Pre-Approved – To meet the more stringent demands of today’s credit requirements, ask any lending institution to pre-approve the qualifications for the mortgage. The lender evaluates the credit history and credit scores, income, savings, and debt obligations to provide a mortgage qualification rating and funding amount, which elevates the credibility with other lenders and financing resources.

Top 10 Adjustable Rate Mortgage Lenders

adjustable rate mortgage-150x150An adjustable rate mortgage is a type of loan that features an interest rate which may adjust during the course of the loan, based on a market index. In contrast to a fixed rate mortgage, where the interest rate remains unchanged for the duration of the loan, the interest rate on an adjustable rate mortgage may rise or fall, according to changes in interest rates in the marketplace. The main reason to consider an adjustable rate mortgage over a fixed rate mortgage is that you could end up paying a lower monthly payment. This type of loan may start out with a low interest rate, but your interest rate could raise in the future. Knowing what to expect from an adjustable rate mortgage and which lender you should choose is crucial.

 Adjustable Rate Mortgage Lenders- What to Pay Attention to

  • Interest rates. Adjustable rate mortgage loans have a smaller interest rate at the beginning of the repayment period, but that interest rate will be adjusted over time. Depending on changes in the market and in the economy, the interest rate could go lower or higher, meaning your overall cost of the loan will either decrease or increase.
  • Caps. While an adjustable rate can be a risky choice due to the fact that the interest rate can rise significantly, there is a way in which you can manage that risk. By adding restrictions, called “caps”, to how much the interest rate on your mortgage can adjust, you will limit the risk that your monthly payment will become a burden.
  • Attention to detail. Mortgages have many details that must be taken into consideration by the lender before you should be asked to sign a contract. Overlooking even a small detail can be very costly to the borrower, so avoid adjustable mortgage lenders who try to rush you into signing anything before every little detail is analyzed.
  • Customer service. A trustworthy lender will sit with you and tailor an adjustable rate mortgage that will fit your financial situation and your needs. He will also explain the course of action, what fees you will have to pay, and keep you informed once you have started the mortgage process.

Before choosing an adjustable rate lender, make sure that you have researched them thoroughly. You can be sure that they are going to research you before giving you a mortgage loan, so doing the same will ensure that you will be getting the best deal possible and save you a lot of trouble in the long run. Here is a list of the top 10 adjustable rate mortgage lenders that constantly strive to offer quality service to their customers:

 Top 10 Adjustable Rate Mortgage Lenders

  1. Wells Fargo. The largest bank in the U.S. by market capitalization, the fourth largest by assets, and the second largest in mortgages, deposits, and debit cards, Wells Fargo has approximately 2,000 mortgage branches in the United States. One out of three home loans originates from Wells Fargo.
  2. U.S. Bank. Owned by parent company U.S. Bancorp, the fifth largest bank in the United States employs more than 63,000 people, and has over 15 million customers. U.S. Bank provides financial services to individuals, businesses, government institutions and nonprofit organizations.
  3. HSBC. British company HSBC started offering its financial services in the United States after acquiring the Republic National Bank of New York in 1999 for 10.3 billion dollars. HSBC started offering mortgage loans online or by the phone to the U.S. public in 2005.
  4. SunTrust Banks. One of the leading financial services holding companies in the United States, SunTrust has more than 1,600 branches and around 3,000 ATMs across the Southern states. The bank was formed by the merger of SunBanks, Inc. from Florida and the Trust Company of Georgia in 1985.
  5. TD Bank. Founded in 1852 in Portland, Maine, TD Bank is a U.S. bank that offers banking, mortgage and investment banking services. It currently serves the following states: Connecticut, New Jersey, Delaware, District of Columbia, New York, Florida, Rhode Island, Maine, Massachusetts, Maryland, Vermont, New Hampshire, North Carolina, Pennsylvania, South Carolina, Virginia, and Washington.
  6. First National Bank of Omaha. A subsidiary of First National of Nebraska, the biggest privately owned bank in the United States, First National Bank of Omaha and its 5,000 employees serve the following states: Illinois, Nebraska, Colorado, Iowa, Texas and Kansas.
  7. Zions Bank. Owned by Zions Bancorporation, Zions Bank owns 106 branches and has 2,700 employees in Utah and Idaho.  Zions bank was founded in 1873 and was acquired by Keystone Insurance and Investment Company in 1960.
  8. Bank of the West. Founded in 1874, Bank of the West is a subsidiary of the French group BNP Paribas and it serves most states in the Midwest and Western U.S.
  9. Commerce Bank. The largest independent bank in the lower Midwest, Commerce Bank is a subsidiary of Commerce Bancshares, Inc. Commerce Bank offers financial services to businesses and individuals in Illinois, Missouri, Oklahoma, Kansas and Colorado.
  10. North American Savings Bank. With over 1 billion dollars in assets, North American Savings Bank offers retail financial services to customers in the United States since 1927. North American Savings Bank is one of the leading mortgage lenders in the country, with over 8 billion dollars in home loans since 2008.

Choosing between a fixed rate and an adjustable rate mortgage can be quite difficult, so discussing your concerns with a top mortgage lender is recommended. They will take all the factors, such as your financial situation and future plans, into consideration and come up with the best choice for you. An adjustable rate mortgage may look very tempting at first due to its low interest rate, but always remember that there is a chance that the interest rate will raise in the future.

Take Advantage of Current FHA Mortgage Rates

FHAThrough FHA loans, the Federal Housing Administration (FHA) allows people with a lower income to take out a loan for the purchase of a home. FHA loans are not actual loans, but a type of insurance. If you get approved for an FHA loan, the Federal Housing Administration will insure this loan against default. Being designed for people with low to moderate income, FHA loans allow someone to borrow up to 96.5 percent of the cost of the home.

As opposed to conventional mortgage rates, FHA rates are endorsed by a mortgage bond issuer group called Ginnie Mae, the only group of its kind that is fully backed by the US government. This makes Ginnie Mae bonds risk free, and the Federal Housing Administration mortgage rates reflect this.

Advantages of an FHA Loan

With lower mortgages rates than conventional mortgage programs, Federal Housing Administration loans are an attractive alternative. Here are some advantages to taking out an FHA loan:

  • Easy to qualify with a less than perfect credit score. Conventional loans made through Freddie Mac and Fannie Mae punish applicants with a credit score lower than 740, but you can still qualify for an FHA loan if you have a low credit score.
  • Smaller down payment. Being as low as 3.5 percent, down payments for FHA loans are generally lower than down payments for conventional loans, which can be as high as 20 percent.
  • The down payment and closing can be paid with borrowed money or gifts.
  • No prepayment penalty. While many conventional loans require you to pay a prepayment penalty, with FHA loans you’re able to pay off your mortgage before the full term of the loan.

FHA Mortgage Rates and Insurance Premiums

FHA mortgage rates have decreased a lot lately, but the cost of the mortgage remains mostly unchanged due to high mortgage insurance premiums (MIP). Because FHA provides insurance for loans, it faces the same risks as home insurance company, for example. If the amount of premiums it collects isn’t higher than the amount of claims paid, the FHA could face bankruptcy. The FHA differs from other insurers because it is required to maintain $2 for every $100 insured in its reserves, but, in November 2011, it was discovered that the FHA only held $0.24 for every $100 insured, which made insurance premiums increase 4 times during the last 4 years.

While the FHA used to charge an annual mortgage insurance premium of only 0.50 percent back in 2008, the annual MIP is up to 1.25 percent in some cases, and even 1.50 percent in some high cost areas. This means that, for example, if you have a mortgage rate of 4 percent, your annual mortgage rates will be as high as 5.25 percent, with the current mortgage insurance premiums.

The good news is that the FHA insurance is not permanent. On a 30-year fixed rate FHA mortgage, the insurance has to be paid for at least 5 years before the MIP can be removed, regardless of what your loan balance or loan to value ratio is. On a 15-year fixed-rate FHA mortgage, the MIP is removed as soon as your loan to value ratio is low enough.

mortgage-insuranceAnother good news is that, if your mortgage pre-dates June 1, 2009, you could get a reduced MIP through the FHA Streamline Refinance program. In order to qualify for the FHA Streamline Refinance you must have made at least 6 mortgage payments in the last 12 months, and not have missed any payments in the last 12 months. Through this program, you will only pay a 0.55 percent annual mortgage insurance premium.

Even with fairly high mortgage insurance premiums, FHA loans are still an attractive alternative to conventional loans for people with a lower credit score, and who want to take advantage of the low FHA mortgage rates and various other advantages.

Mortgage Lender or Mortgage Broker?

Narrowing the Field of Options
Mortgage Lender or Mortgage Broker?For any potential home buyer trying to determine the best course of action when seeking a mortgage, they certainly face a daunting task. Navigating their course through the multitude of banks, mortgage brokers, and on-line resources to find the most affordable offers and services requires a good amount of fortitude, common sense, and a well thought-out plan of action and achievable goals. No matter where their search takes them, most of these funding sources will be quite eager to discuss the options and take their application well in hand. The best strategy begins with a preliminary survey of which lending environment provides the most security and comfort, and then narrowing the field of options accordingly. The online mortgage rates tables and loan calculators can assist quite favorably in this process, as well as provide the borrower a good sense of just where the market is situated in terms of interest rates and affordability.

Check the Local Network
Whether the borrower is considering the services of a mortgage broker or banking institution, it is always a good practice to begin the search close to home. A great amount of useful information can be acquired in a local environment, such as banks or credit unions where a borrower has an established relationship. Friends and family members can also offer referral advice regarding loan officers or mortgage brokers who provided the best and most professional services, along with the most competitive offers. By virtue of the type of financial expense buying a home represents, a potential borrower deserves the very best attention when taking on such an important and long-term obligation like a mortgage loan. In fact, talking to the real estate agent they are considering working with is often a great place to start for their lender recommendations.

Evaluate the Performance and Service
mortgage broker's performanceWhen pursuing the mortgage options, a potential borrower will either resolve the decision on where to seek loan financing on their own, or acquire the services of a mortgage broker. One of the advantages of a mortgage broker is the ability to shop the loan funding among various lenders for the best offers available. While the broker may have the widest range of options to present, it is important to know that they do not necessarily have any special privileges or access to offers unavailable elsewhere, nor are they obligated to actually provide the best deal in the borrower’s interest, or at the lowest cost, because of their profit motivations. Certainly the best tactic is to speak with that particular broker’s most recent clients, to determine if they received the deal or loan specifications that where promised, did the costs or closing fees meet up with expectations, were the interest rates locked-in and did the closing process proceed according to the time-frame specified, and so on. Whether it is a banker or broker, the best mortgage deal will be evaluated based on how well the research has been done, and how carefully the potential borrower has studied all the options.