What is an VA loan?
VA (Department of Veterans Affairs) loans are also government-backed mortgages available with low (or even no) down-payment options, minus the mortgage insurance required on FHA loans. However, the VA typically charges a one-time funding fee that varies according to down payment. You must have a military affiliation to get a loan — active-duty members, veterans, guard members, reservists, and certain spouses may qualify.
What is an interest-only mortgage?
Technically, interest-only mortgages are a type of ARM that allows home buyers to pay only interest for a certain period at the beginning of the loan, keeping payments as low as possible. They can be a good choice for someone who expects a significant increase in income in the future.
If this sounds like a sweet deal, it’s because interest-only mortgages come with tremendous risk.
The payment is lower initially because you are only paying interest, and not principal. Once the interest-only payment period is up, your payment will jump when you begin to pay the principal of the loan. Plus, you can experience a rate increase. With these risks, you’ll probably want to steer clear of interest-only mortgages as your primary option.
What is a balloon mortgage?
Balloon mortgages offer low, fixed interest rates for a short-term — typically five to 10 years. In fact, you may only pay the interest on the loan for that time.
The catch? The remainder of the loan, likely a very significant sum, is due when the term is up. If your home has declined in value or you’re deemed uncreditworthy, you might be out of luck — and at risk of foreclosure. For this reason, balloon mortgages are rarely the best option for finding the lowest mortgage rate and should be avoided except in special cases.
FAQs
What are closing costs?
With any loan, the moment you complete the process and recieve your money is known as “closing”, or “settling.” When you close a loan, there are additional fees charged by the lender and any other parties involved to finalize the process. These are known as “closing costs.”
Mortgages are complex, with multiple parties involved. As a result, closing costs of your mortgage are likely to cost thousands of dollars. But they’re a necessary step in receiving the financing for your house.
Here are some of the possible fees that go into closing costs:
Taxes
Prepaid interest
Title deed transfer fees
Real estate agent fees
Property surveys/appraisal costs
Homeowners association fees
Legal fees
Fees for purchasing interest points to lower your rate
Can I lower my closing costs?
Yes. Luckily, there are ways to lower your closing costs.
Some solutions, such as hiring an attorney, might end up costing you more in the long run. But others won’t come with any cost at all:
Shop around: Even if you have average to poor credit, you need to do your homework before selecting a lender. Some may offer low closing costs, as well as more favorable rates.
Close near the end of the month: You prepay interest from the day you close to the end of the current month. Closing on April 27 means you prepay interest for three days, while closing on April 15 means you’ll prepay for 15.
Know your fees: Mortgage lenders may pad their loans with a number of unnecessary fees, which can cost hundreds of dollars.
What is a good interest rate for a mortgage?
The Freddie Mac Primary Mortgage Survey says the average rate for a 30-year mortgage in 2017 is 3.94%. That’s incredibly close to the historically low rates the economy experienced in 2012 (3.87%) and great news for home buyers. (For the record, Zillow® Mortgages shows an average of 3.61% for 30-year FRMs.)
The Freddie Mac Primary Mortgage Survey says we closed out 2017 with an average rate for a 30-year mortgage at 3.99. That’s a considerable drop from the average rate around this time last year (4.32% during December 2016) and great news for home buyers. (For the record, Zillow® Mortgage shows a current average of approximately 3.7% for 30 year FRMs.)
If you have an average credit score, you probably shouldn’t consider any rate above 5%. And if your credit score is excellent, you might be able to score rates as low as 2.5%.
How does your credit score affect your mortgage?
Your credit score is the metric lenders use to determine your ability to pay on your loan. If your credit score is lower than average (generally 600 and below), you won’t score as good of a mortgage rate as someone with excellent credit.
There are two primary types of credit scores: FICO and VantageScore. Their ranges vary slightly, but a credit score of 700 or above is considered good for both. Check out our guide for several smart ways to improve your credit score, which can also help you secure the lowest mortgage rate.
How are mortgage rates set?
Mortgages tend to be more complicated than your average personal loan. And mortgage lenders tend to be more sensitive to changes in the marketplace. If you’re currently in the market for a mortgage or mortgage refinance, be aware of two major factors that tend to affect mortgage rates.
Secondary markets
Your mortgage doesn’t necessarily stay with the same organization you signed with. Instead, the bank, credit union, or lender you signed with often sells your mortgage to third-party investors. These investors are typically known as aggregators.
Aggregators often lump individual mortgages together into what are called mortgage-backed-securities (MBS). (One major factor in the financial crisis of 2008 was an overwhelming number of subprime, or bad credit, securities.)
Mortgages with higher interest will often result in higher returns for investors. So, while homebuyers favor mortgages with lower interest, aggregators favor mortgages with higher interest. That conflict is a major factor in determining mortgage interest rates.
Inflation
Inflation and interest rates have a direct relationship. The higher the rate of inflation, the higher interest rates will be. This is because the Federal Reserve wants to continue stimulating the economy’s growth, while slowing the rate of inflation.
If the Fed increases interest rates because of inflation, mortgage rates increase as well. But even just a prediction that interest rates will increase can cause an increase in mortgage rates.
So, when you’re shopping for your mortgage, do your homework. Don’t just check with multiple lenders, but also keep an eye on the mortgage market and the current state of the economy. It’ll help in the long run.
What is a lock period, and how will it affect my mortgage rate?
A mortgage rate lock period is an agreement between lender and borrower to prevent an interest rate from going up or down during a predetermined amount of time.
Usually, mortgage lock periods (also known as mortgage lock-ins) are designed to protect both lender and borrower from fluctuations in the economy while the mortgage is processed.
Often, lock-ins only last for about 30 to 60 days. Once that period is up, you can ask the lender to extend the lock, but there are a few downsides: Locks tend to come with a 1-point increase in your rate, and there can be additional “lock fees.” The longer the lock, the higher the fee will be.
But if you’re looking to avoid last-minute budget issues, or lock a refinancing loan, a lock period can be a powerful tool in your arsenal.
How can I get pre-approved for a mortgage?
When you’re pre-approved for a mortgage or other home loan, it means a potential lender or underwriter has looked at your financial history and they’re confident in your ability to repay the loan.
Typically, lenders examine your credit score, current debt vs. income, pay stubs, and tax history, but the process always varies from lender to lender.
How can I prepare?
In order to have the best chance at pre-approval, as well as the most favorable rates, you need to have and maintain a good to excellent credit score. Always be sure to pay your bills on time and consistently, and never borrow more money than you need.
Additionally, lending advisors or brokers will ask for some basic financial information, including about your savings, debts, employment history, etc. Be sure to have all that information handy.
SOURCE : https://www.thesimpledollar.com/best-mortgage-rates/
SOURCE : https://www.thesimpledollar.com/best-mortgage-rates/
Donate Your Car To Charity {PART 1&2}
