Home ownership as the foundation of the American dream is built into our nation’s cultural DNA.
A recent survey from the National Association of Realtors (NAR) showed that owning a home is a high priority for 51 percent of renters. The idea of what a home is, however, varies widely from one person or family to the next. Some people want a traditional suburban home, surrounded by trees, in a quiet cul-de-sac, or perhaps they want a shingle-style house near the beach. Others may want a super-sleek modern condo in the red-hot center of their favorite city, while others want a cottage in the woods. Regardless of what their ideal home looks like, or where it’s located, the vast majority of people will need to borrow money in order to buy a home. In other words, they will need a mortgage.
There are many different types of mortgages, with various interest rates and terms. However, in practice, it comes down to making a monthly mortgage payment, which combines the principal (amount of the actual loan), interest, taxes and home insurance. In addition, the mortgage process also includes up-front fees and documents.
DOING YOUR 'HOME' WORK
While this process may seem overwhelming, according to TJ Freeborn, Mortgage Professional, Discover Home Loans, there are lots of on-line sources to help consumers understand their options. She says, “It’s smart for consumers to do their homework before they get started. Many people don’t. They should also talk with a trusted mortgage broker—either someone they know or a referral—to find out if they can get preapproved or prequalified and to find out how much house they can afford.”
To clarify, prequalification is the lender’s estimate of how much a consumer is eligible to borrow based on information about income, debt and other financial factors. It is not a guarantee. Preapproval is slightly different. It implies that a lender is ready to make a mortgage loan based on information and documentation.
THE NUTS AND BOLTS OF FINANCING
Ms. Freeborn cautions that “no major purchase takes place without due diligence” and the same holds true for getting a mortgage. One of the most important decisions is whether to get a fixed-rate or adjustable-rate mortgage (ARM). With a fixed-rate mortgage, monthly costs are fixed, whereas, with an ARM, the rate may change over time. An ARM generally starts with a lower rate than a fixed-rate mortgage, but it is designed to adjust periodically depending on market conditions. The initial term ranges from one to 10 years before the readjustments start. “It’s really important to know what your reset date is if you have an ARM. A mortgage broker can help walk you through what that reset could look like. ARMs are ideal for people who don’t plan to stay in a home long, especially if they plan to move out before the reset date,” says Ms. Freeborn.
It’s also important to know how much the entire loan will cost throughout the lifetime of the mortgage. The APR (annual percentage rate) represents the cost of the loan, including the interest rate and upfront fees.
Even though fixed-rate loans tend to have slightly higher interest rates, there is flexibility with terms. Again it comes back to the fact that the mortgage market is not one-size-fits-all. According to Ms. Freeborn, “In addition to 15- and 30-year terms for fixed-rate mortgages, conventional loans offer rates for 10- and 20-year periods as well.” She reiterates, “Every homeowner and every situation is unique.”
REFINANCING
When it comes to refinancing, the goal is to take an existing loan and refinance it into a lower interest rate or shorter loan term. Ms. Freeborn reminds consumers that you don’t have to refinance with the same person you got your mortgage from. A lot goes into choosing which person and institution to work with. Look for credible institutions with a good track record and reputation, and find out whether there are any rewards programs, such as a close-in-time guarantee for new mortgages, or in the case of refinancing, a welcome back bonus.
THE RIGHT TIME TO BUY IS NOW
Is there a right time to buy or refinance? According to Frank Donnelly, Chairman, National Bankers Association, “A lot of times, people think that because rates have recently gone up that suddenly, it’s not a good time to buy, but the ability to lock in a 4.5 percent interest rate on a 30-year, fixed-rate mortgage is an incredible opportunity. I’ve talked to people who originally thought that their mortgage payments were high—and then 28 years later, the payment is the same and it seems low. Unlike insurance and taxes, fixed-rate mortgage payments are not subject to inflation.”
Freeborn also notes that compared with 10 years ago, interest rates are near historic lows. Cameron Findlay, Chief Economist, Discover Home Loans, says, “Ownership in terms of affordability remains exceptionally attractive influenced by monetary stimulus helping drive rates to their current levels, which remain relatively low despite the recent move higher; however, staring in 2014, expect affordability to be driven by stricter government regulations.” Freeborn is optimistic, and says, “No one has a crystal ball about where interest rates will go. It’s an imperfect science at best, but it’s still an excellent time to buy or refinance.
source:- http://us.mediaplanet.com/real-estate/whats-the-key-to-unlocking-the-door-to-your-dream-home
A recent survey from the National Association of Realtors (NAR) showed that owning a home is a high priority for 51 percent of renters. The idea of what a home is, however, varies widely from one person or family to the next. Some people want a traditional suburban home, surrounded by trees, in a quiet cul-de-sac, or perhaps they want a shingle-style house near the beach. Others may want a super-sleek modern condo in the red-hot center of their favorite city, while others want a cottage in the woods. Regardless of what their ideal home looks like, or where it’s located, the vast majority of people will need to borrow money in order to buy a home. In other words, they will need a mortgage.
There are many different types of mortgages, with various interest rates and terms. However, in practice, it comes down to making a monthly mortgage payment, which combines the principal (amount of the actual loan), interest, taxes and home insurance. In addition, the mortgage process also includes up-front fees and documents.
DOING YOUR 'HOME' WORK
While this process may seem overwhelming, according to TJ Freeborn, Mortgage Professional, Discover Home Loans, there are lots of on-line sources to help consumers understand their options. She says, “It’s smart for consumers to do their homework before they get started. Many people don’t. They should also talk with a trusted mortgage broker—either someone they know or a referral—to find out if they can get preapproved or prequalified and to find out how much house they can afford.”
To clarify, prequalification is the lender’s estimate of how much a consumer is eligible to borrow based on information about income, debt and other financial factors. It is not a guarantee. Preapproval is slightly different. It implies that a lender is ready to make a mortgage loan based on information and documentation.
THE NUTS AND BOLTS OF FINANCING
Ms. Freeborn cautions that “no major purchase takes place without due diligence” and the same holds true for getting a mortgage. One of the most important decisions is whether to get a fixed-rate or adjustable-rate mortgage (ARM). With a fixed-rate mortgage, monthly costs are fixed, whereas, with an ARM, the rate may change over time. An ARM generally starts with a lower rate than a fixed-rate mortgage, but it is designed to adjust periodically depending on market conditions. The initial term ranges from one to 10 years before the readjustments start. “It’s really important to know what your reset date is if you have an ARM. A mortgage broker can help walk you through what that reset could look like. ARMs are ideal for people who don’t plan to stay in a home long, especially if they plan to move out before the reset date,” says Ms. Freeborn.
It’s also important to know how much the entire loan will cost throughout the lifetime of the mortgage. The APR (annual percentage rate) represents the cost of the loan, including the interest rate and upfront fees.
Even though fixed-rate loans tend to have slightly higher interest rates, there is flexibility with terms. Again it comes back to the fact that the mortgage market is not one-size-fits-all. According to Ms. Freeborn, “In addition to 15- and 30-year terms for fixed-rate mortgages, conventional loans offer rates for 10- and 20-year periods as well.” She reiterates, “Every homeowner and every situation is unique.”
REFINANCING
When it comes to refinancing, the goal is to take an existing loan and refinance it into a lower interest rate or shorter loan term. Ms. Freeborn reminds consumers that you don’t have to refinance with the same person you got your mortgage from. A lot goes into choosing which person and institution to work with. Look for credible institutions with a good track record and reputation, and find out whether there are any rewards programs, such as a close-in-time guarantee for new mortgages, or in the case of refinancing, a welcome back bonus.
THE RIGHT TIME TO BUY IS NOW
Is there a right time to buy or refinance? According to Frank Donnelly, Chairman, National Bankers Association, “A lot of times, people think that because rates have recently gone up that suddenly, it’s not a good time to buy, but the ability to lock in a 4.5 percent interest rate on a 30-year, fixed-rate mortgage is an incredible opportunity. I’ve talked to people who originally thought that their mortgage payments were high—and then 28 years later, the payment is the same and it seems low. Unlike insurance and taxes, fixed-rate mortgage payments are not subject to inflation.”
Freeborn also notes that compared with 10 years ago, interest rates are near historic lows. Cameron Findlay, Chief Economist, Discover Home Loans, says, “Ownership in terms of affordability remains exceptionally attractive influenced by monetary stimulus helping drive rates to their current levels, which remain relatively low despite the recent move higher; however, staring in 2014, expect affordability to be driven by stricter government regulations.” Freeborn is optimistic, and says, “No one has a crystal ball about where interest rates will go. It’s an imperfect science at best, but it’s still an excellent time to buy or refinance.
source:- http://us.mediaplanet.com/real-estate/whats-the-key-to-unlocking-the-door-to-your-dream-home
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