Granada Hills Realtor Harry Sargsyan: 1-818-968-2681

The Ultimate Guide to Understand Mortgages

Guide Understand Mortgages in Granada Hills When you are ready to buy a home, how can you understand the mortgage process to make sure you can get the most for your money? Mortgages can be a complicated thing. There are different types, such as fixed rate or adjusted rate mortgages. There are also different lengths, such as fifteen or thirty years. How can you get your interest rate low? How much down payment do you need? How can you find the right mortgage for you when there are so many options out there? When do you qualify for a government mortgage? These are all questions that need to be answered when you are in the process of buying a home.

To buy a new home is one of the most exciting processes, but it can also be very stressful. Provided here is a guide to understanding mortgages so that you can prepare yourself for the prospect of conducting your mortgage search. A mortgage is a long term commitment, so you want to shop carefully.

What is the best way to shop for a mortgage?

There are many lenders out there. You can go to a bank, a financial institution, or an online lender. They can all be good options. They also will all give you a good faith estimate when you go for a quote. They must disclose to you the interest rate, the loan terms, and most of the additional costs associated with the mortgage. Remember there are always additional fees. Remember that customer service matters as well. You may be dealing with this company for a very long time, so you want to be able to work well with them.

Fixed rate vs. adjustable rate mortgage – what is the difference?

This is a great place to start. Understanding how the interest rates work will help you determine what type of mortgage to obtain for you.

A fixed rate mortgage is the typical type of mortgage you will see. They are less expensive now than they have been in a very long time. The gap between a fixed and adjustable rate have narrowed greatly, so choosing the options where you do not know how the rate will change does not seem worth giving up the security of the fixed rate.

If you expect to stay in your home for many years, and you comfortably qualify for a loan, the long term, fixed rate is a great choice. How long will it take for you to pay off your loan? You can choose a fifteen or thirty year loan, and this can depend on how long you plan to stay in your home.

An adjustable rate will change with the market. This is not a stable choice, but if you do not plan on being in the house long term, then this may save you some money. You can discuss this option with your real estate agent or with your mortgage broker.

There are several factors that will determine your adjustable interest rate, and whether it is a good deal. These are a few of those factors:

  • What is the index being used?

These interest rates are linked to common money-related indexes that lenders use. These include – one year Treasury securities, London Interbank Offering Rate, or the Cost of Funds Index for Western banks in the Federal Reserve’s 11th District. These rates will vary, and some are more volatile than others. You can research these as many of them are published.

  • What is frequency of the adjusted rate?

You will want to know how soon and how often the rate will adjust. If the rates are to rise, you want a slower adjustment period and a longer stretch in between. Generally, the rates will change once a year, but you can find ones that change every three or five months.

  • What is the rat cap?

Many of the adjustable rates have a cap that it will reach either at one time or overall. Assume the worse, so that way you know you can afford when the interest rate is high. A standard cap will include a two percent point cap on annual increases, with a six percent point cap overall.

What other types of mortgages do you need to know?

There are some variations to loans, such as the government sponsored loans. Do you have steady income, but not much in the way of a down payment? The government program from Fannie Mae can help with mortgage funds. This program allows borrowers to limit their payment to three percent of the cost of their house, and can receive that three percent as a gift from parents or others. There are other similar mortgages out there.

There are also balloon mortgages, hybrids, and low-doc and no-doc mortgages. Speak to your real estate agent or mortgage lender to determine if these are right for you.

How do you qualify for a mortgage?

There are many factors that can go into qualifying for a mortgage, and the process of buying a home can be nerve racking. This is especially true if you have never purchased a home before. Applying for a home loan does not have to be difficult. It is largely a lot of paperwork and forms, and submitting documents to your lender. There are a few things you want to have ready that you will need when applying for a mortgage:

  • What is your credit rating? This is a large factor in determining what your interest rate will be and how large of a loan you qualify for.
  • You will also need to supply personal information about yourself. This includes your social security number, your income, assets and monthly debt obligations.
  • Copies of all of the documentation of the above information will need to be supplied to your lender. These include W-2s, paycheck stubs, tax returns etc.

The mortgage lender will then supply you with a pre-approval letter. This letter can be used to help you get your offer on a home accepted.

Once you have the mortgage qualification, and can choose the right one for you, then you are ready to buy your new home. Congratulations!