Buying Your First Home? Don’t Miss These Vital Keys to Your First Mortgage!

One of the most important parts of manifest destiny and the American dream is home ownership. Owning your own home can be a very smart investment decision since prices tend to increase faster than the inflation rate, and now, with the recession dropping home prices and interest rates to their lowest in the last decade, there isn’t a better time to buy! Because of the current market timing and the fact that it’s a widely known as a smart investment, now is the time to start considering the idea. Before you rush out, call a realtor and start looking for a house, you should start by seeking out the perfect mortgage for your budget.

To begin your home mortgage search, talk to credit unions, banks, and brokers in your area. You’re looking for someone to hold your hand through the process, but you also want a decent rate with low fees, so make sure to shop around.

When you’re looking at rates, you will be shown two different types - variable/adjustable rate (ARM) and fixed rate. The ARM rate is usually shown as a promotion at a cheap rate, sometimes called a “teaser.” After the fixed period of the ARM is up, you can expect rates to rise significantly if you get into one of these adjustable rate mortgages.

ARMs have two specific things you look for to use in your analysis - when the rate adjusts (anywhere between one month to 10 years) and what the cap on the interest rate is. Usually, the rate will adjust to whatever the prime rate (the federal government chooses this number) is at the time of the adjustment, plus a certain percentage of ‘mark-up’ that pays the bank. When you discover the rate cap, use a mortgage payment calculator to find out how much your maximum monthly payment is, worst case. That’s not to say your mortgage will actually adjust to that rate, but it’s a prudent idea to plan for different scenarios - including worst case.

In the current economic environment, we have extremely low interest rates. By signing on an ARM right now, you would more than likely end up with higher payments later, as the economy rebounds and the rates increase again. However, if you plan to move into a new home before your interest rate is set to adjust, it isn’t a bad idea to capitalize on the low rate. If you feel that rates will continue to drop in the future, an ARM can put you in a great position to take advantage of that.

Fixed rate mortgages are less complicated than ARMs because you know exactly what your payment is for the life of the mortgage. The fixed rate, as it implies, locks in your interest rate for the entire duration of the loan, which is great for current economic times with low interest. This type of mortgage protects you if interest rates go up, and if interest rates fall, you’ll have the option to refinance at the lower rate.

The length of the term on your mortgage can greatly affect the total amount that you pay over the course of the loan term. A shorter, 15-year mortgage has much less compound interest tacked on, so the payments won’t actually double that of a 30-year mortgage. 15-year mortgages can be surprisingly affordable, but if your income can vary from month to month, and it might be a stretch, go for the longer term. With the 30-year mortgage, you can always make additional principal payments during good months to help pay off the loan quicker - effectively racking up less in interest.

Becoming a home owner is an important step in everyone’s life, and with the right home mortgage loan, it can be just as affordable as your rent payment. Start building equity and investing in you home today - you’ll look back on this moment and be glad you did.

Home Mortgage Interest Rates Continue To Fall

Is it the right time to get into a mortgage? No one times the market perfectly, so waiting around could land you with a higher rate. This article by Ki summarizes a lot of important data if you’d like to look at the numbers yourself.

Mortgage Interest Rates Continue To Fall

This was the sixth week in a row were 30 Year mortgage rates fell or held steady. In the tarry 6 weeks 30 year notes have fallen from 6.63 to 6.35. This was preceded by a sudden jump in interest rates in July where 30 year mortgage interest rates rose from 6.26 to 6.63 midst July 17th and July 24th. So during the time rates are little higher today than what we saw on July 17th they have almost fallen rear to mid July levels. It’s interesting to dot that it took one week for rates to jump from 6.26 to 6.63 and six weeks of falling rates to get occlude to the July 17th levels.

This week we also saw decreases in all the other major mortgage products. The 15 year mortgage fell from 5.93 to 5.9 and the 5 year arm fell from 6.03 to 5.97. By far the biggest mover was 1 year arms which fell almost 1/5 of a point movable from 5.33 to 5.15. Below are rates for the 4 major mortgage products for the be late few weeks.

September 4, 2008

30-yr 6.35
15-yr 5.90
5-yr ARM 5.97
1-yr ARM 5.15

August 28, 2008
30-yr 6.40
15-yr 5.93
5-yr ARM 6.03
1-yr ARM 5.33

August 21, 2008
30-yr 6.47
15-yr 6.00
5-yr ARM 5.99
1-yr ARM 5.29

August 14, 2008
30-yr 6.52
15-yr 6.07
5-yr ARM 6.02
1-yr ARM 5.18

August 7, 2008
30-yr 6.52
15-yr 6.10
5-yr ARM 6.05
1-yr ARM 5.22

Ok so what does this mean for a mortgage? Obviously ones mortgage would be lower with falling rates but by how much. Let’s look at a 200k mortgage and using our free mortgage calculator lets fun the numbers based on today’s rates.

September 4th
30-yr $1244.47
15-yr $1676.92
5-yr ARM $1195.24
1-yr ARM $1092.05

August 28th
30-yr $1251.01
15-yr $1680.15
5-yr ARM $1202.96
1-yr ARM $1114.33

July 24th
30-yr $1281.28
15-yr $1707.22
5-yr ARM $1219.75
1-yr ARM $1134.32

So why have rates steadily fallen. I consider it has to be based on rumors (which have now proven to be correct) that the federal nation is going to takeover Fannie Mae and Freddie Mac. Basically the direction takeover provides more assurance to banks that their mortgage insurance is going to be paid out in case of default. The declining fortunes of Freddie Mac spooked some banks into pensive their mortgage insurance was harmoniously worthless. So now banks are concavity rates in their view the risk associated with the loans has gone down.

So what do I expect to see over the next few months? I would be fascinated if mortgage rates don’t collate to fall now that Freddie Mac and Fannie Mae are owned by the government. The Fed has been trying to push down interest rates all year and now they have the revenue to do so (I contemplate this was part of the motivation rearward the takeover of Freddie Mac and Fannie Mae). So does this mean investors? Should they wait for mortgage rates to drop before buying? I don’t ponder so. If rates follow in succession to fall certain estate prices could rise or at least I would expect to see underADJ Expensiveness deals sitting on the market. Instead if you find a dominion to I would watch interest rates and if they string together to fall I would try and relock your mortgage rate at the new lower rate. While I expect rates to fall something unexpected that spooks banks over the next month could of course push mortgage rates postern up.

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Ki lives in Austin Texas. His website has a graph that shows mortgage rate trends. He also provides a free calculator for potential home buyers and a mortgage interest rates widget.

Thanks for sharing that excellent information with us, Ki. I enjoyed reading your report and I know our readers will find it useful as well.

If you’d like to discuss what current mortgage rates mean to you, we can speak with you to help you make the right decisions. Just drop us a line >>

The Truth About Choosing The Right Fixed Rate Mortgage

James Redder is with us today to help us choose the right fixed home mortgage. We’re very excited to present this article to you, since it breaks through many of the myths and misconceptions in the mortgage market. Take it away, James!

The Truth About Choosing The Right Fixed Rate Mortgage

There is always a debate when home buyers have to decide on the merits of 15 or 30 year fixed mortgage rates. Many people wait until they are older before taking on the responsibility of a mortgage so an early payment of this large debt is an important issue to think about. In a situation as important as this time needs to be spent considering all the available options. Home buyers looking into this need to be assured their monthly payments will not increase.

It seems that some lenders are happy to offer deals that appear too good to be true and they usually are. The interest rate should remain the same for fixed rate mortgages until the loan is repaid. This is of great benefit for anyone that does not like surprises. Both my wife and I decided to research fixed rate mortgages when we started looking at homes for sale.

Even though it was important for us to pay off our loan at the earliest possible opportunity, we didn’t want high, unrealistic monthly payments which we would have trouble maintaining. Considering longer term fixed rate mortgages was one option if we could not afford a 15 year plan. We didn’t really like the prospect of having a mortgage as we approached retirement so were really hoping to get one of the loans with 15 year fixed mortgage rates. We felt that there was a great deal of emphasis on paying the mortgage off early.

We thought about it long and hard and despite the pressure we decided to go with the 30 year loan plan. Although a number of things had to be pondered over, eventually the choice was made for us. Discovering my wife was having a baby was the most important reason. As she intended to raise our child at home we couldn’t rely on her financial income to the monthly expenditure. The problem we could see was the increased financial commitment on a monthly basis if we had opted for the 15 year fixed mortgage rate. We knew that it just wasn’t an option and the risk was too great. Despite the trepidation of having a longer term loan, it did reduce the repayments considerably.

We are also able to make extra payments throughout the year to make the principal shrink quicker. Those few extra payments also help reduce the number of years you have to pay the loan over. In the long term, this is a strategy well worth pursuing if you are able. Although we would have much preferred a loan with a 15 year fixed mortgage rate we had to take our needs and abilities into consideration. Anyway, everything worked out fine despite our hesitancy.

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James Redder markets a Finance website. If you liked the finance info, GET the powerful info RIGHT NOW. Goto Refinance After Bankruptcy website.

Excellent tips, James! Thank you for sharing your experience with us!

For a personalized consultation about your home mortgage needs, just drop us a line today. It’s always free, and always great advice.