Buying a home is one of the most important financial decisions you’ll ever make. A home can be an excellent investment because most houses increase in value over the years. Just as important, the type of home you buy, its location, and the monthly mortgage payments you choose will shape your future and that of your family.
This information will help you understand what options you have to consider as you work with your loan officer.
This mortgage is a contract between the lender and the borrower, at the lender’s risk. The borrower’s property is security, (which means the lender can take our home for nonpayment of the mortgage). As such, to protect the lender from any loss with the loan, you may be required to pay for mortgage insurance on this loan through a private mortgage insurance provider. Conventional mortgages usually require a larger down payment than FHA or VA loans.
Fixed Rate Mortgage
The interest rate on this loan stays the same for as long as you hold your mortgage, no matter how interest rates change in the financial markets. You know exactly how much you will pay in principal and interest on your home each month. Remember taxes and insurance may change from year to year.
In recent years, many people have refinanced their home loans to take advantage of low interest rates. Some have also refinanced in order to obtain cash. In a refinance, you pay off your mortgage with a new loan. In a cash-out refinance, you increase the size of your debt in order to get cash at the closing table that you can use for other purposes.
A loan with special terms for properties of very high value that fall outside typical lending standards.
FHA (Federal Housing Administration)
The FHA will insure the loan for the lender against loss in case the buyer cannot make payments. It requires the buyer to carry mortgage insurance through FHA. FHA loans are available with as little as 3.5 percent down payments.
VA (Veterans Administration)
The federal agency will guarantee the mortgages offered by private lenders to qualified members of the armed forces, active military personnel, veterans or their widows. In some cases, one can buy a home on a VA loan with no down payment.
The initial interest rate on an adjustable-rate mortgage (ARM) is generally lower than of a fixed-rate loan. However, with an ARM, the interest rate may increase or decrease in the future, and the size of your payments will go up or down along with the rate.
Most ARMs are hybrids, meaning the interest rate is fixed for a certain number of years after which the rate begins to float. The most common ARMs fix the initial rate for three, five or seven years. ARMs are most appropriate for people who have sufficient financial resources to handle potential payment increases or know that they plan to sell their home around the time the loan’s interest rate is set to change.
If you are considering an ARM, be sure you know:
- What is the adjustment period (the time between interest rate changes)?
- What index is used to determine interest rate?
- Does the introductory rate differ from the normal rate?
- What is the margin (the percentage added to the index rate each time your loan is adjusted)?
- What is the period adjustment cap?
- What is the lifetime adjustment cap Your local Credit Union has a wide variety of home loan options and we have dedicated loan officers ready to work with you and answer all your questions. Call today or visit our mortgage center for more information and rate details.
Your local Credit Union has a wide variety of home loan options and we have dedicated loan officers ready to work with you and answer all your questions. Call today or visit our mortgage center for more information and rate details.