More Bang for Your Buck With Mortgages
by Elaine VonCannon
Choosing a knowledgeable mortgage lender can
make a difference in the quality of home you are able to purchase with your
finances. I prefer to recommend a mortgage broker to my clients, because they
usually offer 50 or more programs. Regular mortgage companies are usually locked
into one source. Take time to research a mortgage lender. And, remember,
creative financing can be the way to go if you need a higher priced home with
Home buying is different now then when your parents or grandparents purchased a
home. When they bought real estate, 30-year mortgages were the standard.
That’s because 10-15 years ago, a person bought one or no more than two homes
in their lifetime. Currently, Americans tend to own more than three homes in
Find a lender who knows the business inside and out and can make your dollar go
further. Ask your realtor to research the housing market in your area, to
predict a rise in property value for that area. When you seek a mortgage, obtain
quotes from three or more lenders. Make certain at least one of these is a
mortgage broker. Ask how many loan products they have to choose from.
The 30 year mortgage is just one of many choices in the real estate loan market.
Rebecca Nichols, a loan officer with Breakwater Mortgage in Virginia Beach,
says, “It’s not so popular anymore to do a 30-year fixed loan. People want
options to help them get the most value from their investment. Some want to pay
lower monthly mortgages so out-of-pocked expenses are less. There’s no real
reason anymore to be locked into a 30 year amortized loan.” Rebecca pointed
out that in the beginning of the loan stages, most consumers are paying off the
A Twelve Mat Loan
This popular loan is based on the treasury market index, which is usually lower
than the prime rate. For the first year the mortgage is at 1% interest. After
that, it’s usually a loan that is 3-5%. Some advantages of this type of loan
include a choice between three different types of payment plans: minimum
payment, interest only or principal and interest.
Interest Only Mortgages
One new trend in mortgages that is very popular right now is interest only
loans. The buyer may elect to make lower payments for two years, five years, or
Adjustable Rate Mortgage (ARM)
Generally, a homebuyer is locked into a certain interest rate for a 3-year
period with an ARM loan. After this the rate fluctuates with the prime rate.
Rebecca Nichols, a mortgage broker, says, “I usually recommend people commit
to an ARM rate for 3 years. When the value of the home has gone up, I recommend
they refinance into a 30-year fixed mortgage or another ARM, depending upon
whether they want to stay in the home.” There are interest only ARM loans
available too. These loans are popular with real estate investors because the
mortgage is easier to cover if they lack a tenant for several months. Interest
only ARMS often homebuyers will be able to obtain a bigger house or something
closer to what they want with an ARM.
80/20 Combo – Fixed or ARM
Some clients prefer to avoid paying mortgage insurance, which is not tax
deductible. If this is their preference, Nichols recommends “finance 80% of
the loan in one loan, and 20% in another. ARMS can also be split this way.
30 Year Fixed Mortgage
If you plan on residing in the same home for at least 20 years, this is the
perfect way to go. It’s a standard, fixed rate for the whole loan duration.
Remember to shop for a mortgage, just as you would for auto, home, health
insurance, or auto loans. Be wary of obtaining your lender on the internet. Some
sites may promise rock bottom interest rates, but the hidden costs and fees can
add up. Also, having a lender present at the closing is an invaluable resource
to the homebuyer. The loan officer or mortgage broker should be present to make
certain the loan documents are correct and answer questions. A lender on another
coast is probably not going to provide you with this type of service.
If you’re in the market for a home and a mortgage, choosing the right lender
will help you get more bang for your buck and the type of dwelling you desire.
About the Author:
Elaine VonCannon is a REALTOR with RE/Max
Capital in Williamsburg, Virginia, and she manages investment property as part
of her business. Elaine is also an Accredited Buyer's Representative as well as
a Senior Real Estate Specialist. She has helped numerous clients invest in and
make money on property in Southeastern Virginia.