Home Financing The Right Way
Shared by: ramhood17
Home Financing The Right Way Your home loan may be the largest financial decision you make. Treat it as a vehicle to grow your net worth over time. It’s my wish that the following presentation will help to make you a better informed investor. Before Deciding On A Mortgage, Consider These Factors How long will I own this property? Am I looking for a fixed loan or a more flexible program? Is an interest only payment attractive? Is it important to have adequate cash flow to fund a retirement plan or a savings account? Do I wish to refinance to pay off high interest credit card debt? Do I wish to use some of my equity to purchase another property that will appreciate over time? Once You Have Determined What Is Important You Will Have A Better Idea Of The Type Of Loan To Seek Let’s Take A Look At The Most Common Loans Available 30 Yr Fixed 15 Year Fixed 3, 5, 7 , 10 Yr Fixed 3, 5, 7, 10 Yr Fixed Interest Only Pay Option ARMS What Is An Adjustable Interest Rate And How Is It Determined? Adjustable interest rates are determined by adding the lenders margin to the index you have chosen. The index can change periodically based on inflation data. Your loan’s margin however stays the same over the life of the loan. Index Rate + Margin = Your Rate What Indexes Are Used To Determine My Adjustable Rate? Here Are The Most Common Indexes You Will Chose From MTA Index (Based on the 12 month Treasury) LIBOR Index (Based on London Inter Bank Rates) COFI Index (Based on Cost Of Funds Rate as Determined by the Fed) Which Index Is Right For Me? Simply ask your mortgage professional to give you the historical trends for any index you are considering. Indexes tend to move differently in response to inflation data. Some are more volatile than others. Once you have the historical data you will be best able to judge which one you are most comfortable with. Buy Down Points When should I consider paying buy down points for a home loan? The answer is easy. Your mortgage professional can provide you with a spreadsheet that will easily show you if interest expense can be reduced by paying points upfront. Essentially, the longer you intend to have the loan the more likely you would save money with a buy down. If you intend to have your loan for just a few years, the buy down may not be worth it. Ask for a spreadsheet analysis and you will have the answer. A Word About Prepay Penalties And Terms Always be sure to ask your mortgage professional if there are prepayment penalties involved with your loan. This could effect your overall flexibility therefore you will want to know this. A lender will often give you a lower rate if you agree to hold onto the loan for a number of years. If you do elect to accept a prepayment penalty it is often offered for 1, 2 and 3 year periods. Prepayment penalties charged if you pay off the loan early vary by lender but generally equal six months interest. If you are fairly certain that you will have this loan for at least 2 to 3 years or more, you most likely will save money by accepting the prepayment clause. Essentially, the lender is offering you a lower rate because you are committing to the loan for a specific period of time. If you know you will have this loan for an extended period, then the prepay clause will lower your interest expense and save you money! Your Credit Score Considering all the factors a lender uses to evaluate your creditworthiness, your credit score is the most important. There are ways to add points to your score and it can be done quickly. Please click the “credit score” tab on this web sites navigation bar to learn how easy it is to raise that score to qualify for lower interest rate loans. It’s Easy To Apply Now Click on the “application” page on the navigation bar of this web site. Fill in all fields including a short outline of what it is you wish to accomplish with this loan. Choose the method you wish to receive information…e-mail, fax or by phone. You will receive back at least three loan programs to review within 24 hours. It’s that easy. Summary Know what it is you wish to accomplish with your home loan. Flexibility, increased cash flow, being able to fund retirement and savings plans as well as college 529 plans. Possibly you want to pay off high credit card debt or you may wish to use some of your homes equity to purchase a second home or investment property. Determining your goals when financing or refinancing is probably your most important step in the process . With the above in mind, discuss your goals with your mortgage professional. He or she will be able to provide you with several loan programs that will fit your requirements. If you are choosing an adjustable rate loan, discuss which index to use and take a look at the history of how the index has performed. When you believe you have found the loan that fits your goals best, be sure to have your mortgage professional detail all terms, conditions and fees of the program. BE AN INFORMED BORROWER!