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10 Things Commonly Unknown About Home Loans
When you buy a home for the first time there are a lot of things that the average person does not know about mortgages. Through the home buying process most of us learn a great deal, but had we known these things before hand the process might have been a bit easier, and there are even ways that you can save money! Knowledge is key when dealing with mortgages, and here you will find ten things that you may not have thought of before.
0% Down Really Can Happen
You truly can buy a home with zero payment upfront. No, this isn't available to everyone, but for first time homebuyers and those with limited income they may find that zero down is a real option for them. In fact, not only do you not have to put any money down you'll also find that there are government agencies that will pay your closing costs for you. Even for those that don't qualify for the zero down loans there are some great mortgage rates that will allow you to get into a home with relatively little down.
You Might Want To Consider an Adjustable Rate Mortgage
In the past adjustable rate mortgages or ARM's have gotten a bad name because they are associated with interest rates that fluctuate each year. The thing is that ARM loans come in many varieties such as a 5-1 arm, which will be fixed for the first give years and then resets each year after that. This can be an ideal way to save money because ARM loans have interest levels in the 5.8% range while a traditional mortgage is in the 6.3% range.
Adjustable Rates Can't Fluctuate All That Much
As mentioned above, ARM loans have gotten a bad reputation in the past because the interest fluctuates over time. What most people don't know is that the rates cannot simply go through the roof, as they typically have a cap on how high they can go. This makes an ARM loan a great choice for a lot of people because the rate can't go all that high and you can often start out with a much lower interest rate for the first one to five years.
Interest Rates Can Save You a Bundle
If your home mortgage currently has an interest rate of 7.5% and you've seen that current interest rates are less than 6.5% it may not sound like a lot, but it can save you more than $100 a month if you refinance at the lower cost. Of course, you still have closing costs when you refinance, but if you are going to live in the house for at least two or three years you'll find that you will break even quite quickly and then continue to save money over the long run. One interest point can make a lot of difference over the course of a year, and certainly over the course of a 30-year mortgage.
Mortgage Brokers May Be Worth Your Time
If you don't know a lot about mortgages and you need a bit of guidance, you may find that a mortgage broker can help you decide what type of mortgage is perfect for you and your circumstances. Mortgage brokers can help do a lot of the leg work researching the products and loans offered by certain institutions or lenders and then help you decide which the best is for you.
Your Credit Union is a Great Resource
When you check with your credit union or bank you may find that they simply are able to offer you the best interest rate you can find. A credit union can often offer mortgage rates for up to 1% less than financial lenders. The Internet is also a great mortgage resource, as it is a very competitive market and you can find many lenders that are willing to work with you no matter the situation.
You Don't Have To Use a Mortgage Broker
A mortgage broker can be really helpful if you don't know any thing about mortgages or if you have a troubled credit history. But, if you are one of the lucky home buyers that has perfect credit and is able to put 20% down on the purchase price you'll find that your lender and your realtor can often get all of the work done, so there is no need for a broker.
The Internet Has Great Tools
There are a lot of tools on the Internet that will offer to do your math, such as calculate mortgage payments, how much of your payment will go toward the principal, and more. These tools are often helpful in deciding how much you can afford to pay each month.
Paying Points on Your Mortgage Can Work Both Ways
For some people paying points makes sense, and for others it does not. If you pay points up front you can often get a lower interest rate. The lower interest makes senses if you plan to live in the house for an extended period of time, but if you don't you're probably better off skipping the points.
You Can Take Your Mortgage with You
Starting in 2003 you could get a mortgage that was as portable as you are! These mortgages can be transferred from home to home when you move, paying only a small interest fee each time it is transferred to a new home.
As you can see, these ten things can help you get the mortgage that's right for you. Armed with the right information mortgages aren't so confusing!
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