Buying Your Dream Home – A Priority In Any Market


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Even though it’s not easy for everyone to buy a home, it is in fact more affordable than ever to get a home these days with interest rates on most mortgage types at the lowest they have ever been since the mid-thirties when both the FHA (Federal Housing Administration) and FNMA (Federal National Mortgage Association) were established.

It can be said that banks are not as liberal as they were a few years back with providing home loans and mortgages, but if rates remain at this level for any reasonable length of time, you can expect lending to improve.

So even if you don’t have a lot of capital or a lot of money to put down, you can still get the home of your dreams at a very affordable price. There are many folks who think that buying a home is a tough process, needing a large down payment, although this isn’t always the case.

Buying a home largely depends on your budget. If you put a down a substantial amount of money on your home purchase, it will go towards your overall purchase. The more money you put down on a home when you purchase, the lower your monthly payments will be.

If you don’t own a home you most likely live in a rental house or an apartment. This can be a worthwhile solution, although you are still paying money towards your housing needs that you could instead be putting towards a home of your own. Owning a home is a dream for many Americans, especially when it comes to that dream home that most people hope to own one day.

Apartments and rental houses may be great to rent, but if your monthly rent is going to cost you almost as much as a mortgage payment – which seems to be the case these daye – then it makes little sense to rent if you can afford to buy your own.

Instead, you can easily convert your rental payments into monthly installments towards your own home. All across the United States, you can find lenders that offer mortgages with flexible terms and low out-of-pocket costs, such as mortgages which are insured by the FHA.

This mortgage type may be easier for purchasing your own home in today’s economy for two reasons. First, the interest rates are low as stated earlier. Second, they are insured by the federal government and therefore reduces risk for lenders. FHA-insured mortgage loans can help you to get the home of your dreams and enjoy low monthly payments.

Keep in mind that while choosing a mortgage program that’s best for you, all aspects of that program must be taken into consideration. How much of a down payment is required? Will your interest rate be fixed for the full term or ARM (Adjustable Rate Mortgage)? What if my credit report has a few blemishes? Will this prevent me from obtaining a mortgage? How much of my monthly income am I permitted to use for housing costs and other credit obligations?

Although there are many questions to which you may not have immediate answers, some lenders can/will help provide answers by pre-qualifying you for a mortgage.

You can also use an online service to find a lot of answers to your questions. In fact, many aspiring home buyers do their own research in the privacy of their own living rooms with the use of a computer and internet connection. So by the time they are ready to get that pre-approval, most of the questions have been answered.


Another option is to consult a real estate agent, who will be more than willing to provide answers to some of your questions. Good real estate agents will be more than willing to help you get a great deal on the home also, and at prices that are right for you.

Anytime you buy a home, you should always plan ahead, get yourself a real estate agent, and then pursue your dream home.

If you plan your budget and take things one step at a time, you’ll be closer than you think to the home of your dreams. If you choose to keep renting and pay money toward something you don’t own – the home of your dreams will continue to slip away. Take action when conditions are favorable (low interest rates, low home prices), and stop renting – find the home of your dreams and put your money towards owning it instead.

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Deciding on the Mortgage Loan that is Best for You


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Depending on where you are as an informed consumer, you may be aware of the different types of real estate mortgage loans now available on the market. However, being aware that there are a variety of mortgage financing programs and having to decide on one that may be best for your own purposes could be two different things.

It isn’t always easy to decide which type of mortgage loan will be most beneficial to you. All the possibilities opened to you are different and will provide different levels of benefits. So before jumping into a mortgage loan, you want to make sure you have evaluated your individual needs, keeping in mind that the main idea behind a mortgage loan is to help you financially in more than one way.

Let’s take a look at a few of the available mortgage types and an example of what each would mean to you, as well as what you have to bring to the table in order to take advantage of the particular mortgage type.

First is the Traditional or Conventional mortgage. This mortgage type does not require third-party mortgage insurance (e.g. PMI), and comes with the very best rates on the 30 year and 15 year fixed versions. To qualify for this type of mortgage you will need a minimum 20% down payment, great to pristine credit and a stable employment history with and highest qualifying income of all mortgage types listed..

Second is the type of financing known as the PMI (Private Mortgage Insurnce) mortgage. This mortgage type, although having the same qualifying guidelines in terms of credit, employment history and income, does require third-party insurance (thus the title PMI), thereby eliminating the need for a 20% (of the purchase price) down payment, but instead allow you, the borrower, to make a down payment of as little as 5%.

The additional 15% that would otherwise be required on the first mortgage type will be insured by the PMI company on the second mortgage type. The borrower will need everything required for a conventional mortgage loan except the full 20% down payment but will pay an increased monthly fee to cover the PMI premium.

Third is a mortgage loan insured by the Federal Housing Administration and is therefore referred to as a FHA-insured mortgage. Qualification requirements for this type of mortgage are, a “satisfactory” credit profile, minimum down payment of 3.5% (of the purchase price), and 2 consecutive years employment. What you must bring to the table is reasonable explanation(s) for any credit report blemishes, proof of sufficient enough cash to make the purchase as well as enough monthly income to cover mortgage repayments and credit obligations.

Fourth is a VA mortgage. This type of mortgage is guaranteed by the VA (Veterans Administration) and is restricted to veterans of the US Armed Services and their spouses. If you are a veteran and can present a Certificate of Eligibility, a “reasonable” credit profile and stable employment history, you will not be required to make a down payment, but you will have to pay settlement charges (closing costs) to complete your purchase.

The Adjustable Rate Mortgage (ARM) is not separate from Conventional, PMI, FHA and VA, but is an option available to mortgage borrowers qualifying for a mortgage under any of the programs mentioned, but is less popular among FHA and VA borrowers who primarily opt for a fixed term (15 year or 30 year terms) mortgage. There are different variations of the ARM, ranging from a 1 year ARM to a 7 year or 10 year ARM (referred to as a 10 year fixed rate mortgage in some cases).


The initial interest rate on the ARM is usually lower than that of a fixed rate mortgage, but at some point after the first, third, fifth or seventh year that rate will be adjusted to a higher or lower rate, depending on market rates at time of adjustment, but will not exceed the built-in cap for the particular mortgage type.

Once you are aware of the types of mortgage financing available and which will best suit your purposes, you’ll be able to select your home with the confidence in knowing exactly what type of home you want to buy, where you want to buy it and for how much you want to buy it. In fact, you may be able to select a mortgage type based on how long you plan to stay in a particular home. They will be a number of options available to you that did not seem to exist prior to availing yourself of good, usable information.

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Simple Mortgage Choices – Fixed ARM Or Hybrid


Under what circumstances in today’s mortgage market would the fixed, ARM, or hybrid mortgage be best utilized? While the decision to purchase a home is no doubt a major step based on the importance and size of the item being purchased, as well as on the fact that it is one of the few items which requires borrowed money in order to complete the purchase, the decision you will make on the best way to finance this kind of purchase must also be one of the most important decisions you will make.

However, your decision regarding the mortgage type that best suits your home purchase may not be the same after you become a homeowner and you wish to re-finance your home. Whether you are purchasing or want to refinance, the list of available mortgage types you would most likely be selecting from includes a fixed rate mortgage, an adjustable rate mortgage (ARM) or a hybrid mortgage which combines the two options.

The names are pretty much self explanatory but basically a fixed rate mortgage is a mortgage where the interest rate remains constant and an ARM is a mortgage where the interest rate varies. The ARM interest rate varies up and down based on an index such as the treasury 1-year, 3-year, 5-year or 7-year note or the 10-year T-Bill. However there are usually clauses which prevent the interest rate from rising or dropping dramatically during a specific period of time. This safety clause provides protection for both the homeowner and the lender.

Advantages of a Fixed Option

A fixed rate option is ideal for home buyers or refinancing homeowners with good credit who are able to lock in a favorable interest rate. For these homeowners the interest rate they are able to retain makes it worthwhile for the home buyer/homeowner to borrow at the newest, lowest interest rate. The major advantage to this type of financing option is stability. Home buyers/homeowners who finance with a fixed mortgage rate do not have to be concerned about payment variations during the life of the mortgage, thus the term “fixed rate”.

Disadvantages of a Fixed Option

Although the ability to lock in a favorable interest rate is an advantage it can also be considered a disadvantage. This is because home buyers who obtain a prevailing market interest rate at the time of purchase will not be able to take advantage of subsequent interest rate drops unless they re-finance. And every subsequent refinance will result in the homeowner incurring additional closing costs.

Advantages of an ARM Option

An ARM is favorable in situations where the interest rate is expected to drop in the near future. Home buyers and homeowners who are skilled at predicting trends in the economy and interest rates may consider financing with an ARM if they expect the rates to drop during the course of the loan period. However, interest rates are tied to a number of different factors and may rise unexpectedly at any time despite the predictions by industry experts.

A mortgage consumer who can reasonably predict the interest rate markets would be able to determine whether or not an ARM is the best financing option. However, since this is not possible for most home buyers and homeowners, they will have to either rely on their instincts and hope for the best or select a less risky option such as a fixed interest rate.

Disadvantages of an ARM Option

The most obvious disadvantage to financing with an ARM is that interest rates may rise significantly and unexpectedly. In these situations the homeowner may suddenly find themselves paying significantly more each month to compensate for the higher interest rates. While this is a disadvantage, there are some elements of protection for both the homeowner and the lender. This often comes in the form of a clause in the terms of the mortgage contract which prevents the interest rate from being raised or lowered by a certain percentage over a specific period of time.

Consider a Hybrid Financing Option

Home buyers and homeowners who are undecided and find certain aspects of fixed rate mortgages as well as certain aspects of ARMs to be appealing might consider a hybrid re-financing option. A hybrid loans is one which combines both fixed interest rate features and features of adjustable interest rates. This is often done by offering a fixed interest rate for an introductory period and then converting the mortgage to an ARM.

In this option, lenders typically offer introductory interest rates which are extremely enticing to encourage homeowners to choose this option. A hybrid loan may also work in the opposite way by offering an ARM for a certain amount of time and then converting the mortgage to a fixed rate mortgage. This version can be quite risky as the homeowner may find the interest rates at the conclusion of the introductory period are not favorable to the him/her.