Interest Rates & Mortgages
Buying a home is one of the biggest purchases someone can make in life but securing a mortgage loan doesn't have to be difficult.
What is a Mortgage? A mortgage, or mortgage loan, is a legal agreement where a lender offers money to a borrower to purchase real estate in exchange for interest. The loan is secured by the real estate, so if the borrower fails to repay (defaults) the lender can foreclose, selling the property to pay off the loan.
Mortgage rates are mixed today. Rates on mortgages change daily, but overall, they are historically low. If you are looking to purchase or refinance, it's a great time to lock in a rate. Be sure to shop around for the best mortgage rates. Mortgages come in two primary forms- fixed rate and adjustable rate- with different combinations of each. An understanding of interest rates and the economic influences that determine the course of them can help consumers make sound decisions. Another aspect of the mortgage loan rate is the amount of the down payment when purchasing real estate. The more down you put towards to the purchase initially, the less your loan will be.
Fixed Interest Rate Mortgages: The interest rate on this type of mortgage is fixed for life, with equal monthly payments for the life of the loan. During the first part of the loan, most of the payments go towards the interest. Fixed interest loans can be for 10, 15, 20 years but the most popular are the 30-year loan. However, on average a 30-year fixed-rate mortgage has a lifespan of seven years since homeowners frequently move or will refinance.
Adjustable-Rate Mortgages: The interest rate on adjustable rate mortgages may change monthly, every six months or annually depending on the terms. The interest rate on this type is tied to an index. There are several different mortgage indexes used for adjustable rates. These types of loans are best for those who expect to sell or refinance before the first or second adjustment.
Closing on loans: It's taking a little longer to close on a loan. Recently, the average time to close on any type of loan was 45 days.
Understanding what influences current and future types of mortgage rates can help you make financially sound mortgage decisions.
Some things to keep in mind:
1. If you're not sure where to go for information on the mortgage process, ask your real estate, agent. Oftentimes, they will work closely with one or a few mortgage brokers.
2. Check information online prior to the loan process so you have some knowledge going into the process. Thankfully, the internet is a great resource for all types of things.
3. Having a solid two-year work and income history makes you a strong candidate for a loan along with a good credit history.
4. Organized your documents before going to a lender. Typically, they will ask for recent pay stubs, past two years of W-2's and tax returns and the past few months bank statements.
5. Figure out your down payment. Have you been saving for this? If not, get started now! You will need some monies besides your loan amount and to also show that you are a serious buyer.
The home buying process can be thrilling and exhausting but with planning, diligence and the right people by your side to help you through it, you'll be in your home in no time! Good luck!