Finding a home loan that works for you can be a tricky process. Each home loan is distinctly defined by various factors. What’s more, each lender will provide you with different rates. The best way to go about finding home financing that addresses your needs is to shop around. But before doing so, you’ll need to know what to look for.
Selecting a Mortgage
Selecting a mortgage is not only time consuming but confusing, given the vast variety of loan packages on offer in today’s market. With different mortgage rates, varied costs and fees and multiple terms and conditions, you need to be well informed to make the correct decision about which mortgage is best suited for you.
More so than other aspects of a home loan, mortgage rates are extremely important while selecting a mortgage. Interest rates fluctuate depending on different factors that influence the economy like prime rate, Treasury bill rates, federal fund rate, federal discount rate and certificate of deposit rate etc. If the economy is doing well and the demand for mortgages is high, the interest rates will also see a climb. Conversely, if the demand for mortgages is low in a poor economy the interest rates will drop as well.
Along with the interest rate, there are other factors that need to be taken into consideration when searching for the home loan that’s right for you. These include your financial situation such as income, savings and liquidity, your housing needs and duration of stay, the level of risk you are willing to take as well as the term of your loan. All these factors need to be considered equally and balanced when mortgage shopping.
Before you decide on which mortgage is best for you, you will need a mortgage lender’s approval who -based on your credit rating- will offer you a loan that they feel you qualify for. The mortgage lender will take into consideration your financial trustworthiness and then adjust your interest rates, points, terms etc accordingly. Only after this will you be able to select a mortgage that fits your needs both personally as well as financially.
Before we send you off into the mortgage matrix, let’s first explore the basics of home finance more in-depth.
BASIC FEATURES WHILE SELECTING:
1) Interest rate – fixed or variable:
In a fixed rate mortgage your interest rate will not change throughout the entire duration of the loan. This will enable you to know exactly what your periodic payout is and how much of the mortgage will be paid off at the end of the term. Here are some of the most popular fixed and variable home loans.
- Federal Housing Administration Insured Loans (FHA)
- Veterans Administration Loans (VA)
- Farmers Home Administration Loans (FmHA)
The interest in a variable rate loan has the potential to change every year. Variable loans are by nature fickle.
2) Duration of mortgage: short or long term
The standard mortgage last between six months to ten years. If the term of the loan is short, the interest rates will tend to be low. A short term mortgage is for two years or less and is appropriate for people who feel that the interest rates will drop in the future, just in time for renewal. A long term mortgage is for three years or more and most suited for people who believe that current rates are stable and reasonable and want the security of budgeting for the future. After the expiration of the loan’s term you can either renew the mortgage at the current rates or repay the balance principal owed on the mortgage.
3) Open or closed mortgages
Open mortgages are typically short-term loans that can be paid off at any time without penalty. Homeowners planning to sell in the near future or require the flexibility to make large, lump-sum payments before maturity generally choose these kinds of mortgages. Closed mortgages are committed after taking into consideration specific terms. If you want to pay off the mortgage balance you will have to wait until the maturity date or pay a penalty.
4) Conventional or high ratio
A conventional mortgage is one that is no more than 75% of the appraised value of the property. The balance amount is paid through your own resources and is known as down payment. If you have to borrow more than 75%, you will need a high ratio mortgage. If the down payment is less than 25%, the mortgage will have to be insured. The insurer will charge a fee which predicated amount borrowed and the percentage of your down payment. Fees range from 1% to 3.5% of the principal amount and can be paid up front or added to the principal amount of the mortgage.
If you have more questions about a home loan or are ready to apply for a home loan, consult the best home lenders in Rapid City, South Dakota when you sit down and chat with loan officers at Affiliated Mortgage.
Finding a home loan that works for you can be a tricky process. Each home loan is distinctly defined by various factors. What’s more, each lender will provide you with different rates. The best way to go about finding home financing that addresses your needs is to shop around. But before doing so, you’ll need to know what to look for.
Selecting a Mortgage
Selecting a mortgage is not only time consuming but confusing, given the vast variety of loan packages on offer in today’s market. With different mortgage rates, varied costs and fees and multiple terms and conditions, you need to be well informed to make the correct decision about which mortgage is best suited for you.
More so than other aspects of a home loan, mortgage rates are extremely important while selecting a mortgage. Interest rates fluctuate depending on different factors that influence the economy like prime rate, Treasury bill rates, federal fund rate, federal discount rate and certificate of deposit rate etc. If the economy is doing well and the demand for mortgages is high, the interest rates will also see a climb. Conversely, if the demand for mortgages is low in a poor economy the interest rates will drop as well.
Along with the interest rate, there are other factors that need to be taken into consideration when searching for the home loan that’s right for you. These include your financial situation such as income, savings and liquidity, your housing needs and duration of stay, the level of risk you are willing to take as well as the term of your loan. All these factors need to be considered equally and balanced when mortgage shopping.
Before you decide on which mortgage is best for you, you will need a mortgage lender’s approval who -based on your credit rating- will offer you a loan that they feel you qualify for. The mortgage lender will take into consideration your financial trustworthiness and then adjust your interest rates, points, terms etc accordingly. Only after this will you be able to select a mortgage that fits your needs both personally as well as financially.
Before we send you off into the mortgage matrix, let’s first explore the basics of home finance more in-depth.
BASIC FEATURES WHILE SELECTING:
1) Interest rate – fixed or variable:
In a fixed rate mortgage your interest rate will not change throughout the entire duration of the loan. This will enable you to know exactly what your periodic payout is and how much of the mortgage will be paid off at the end of the term. Here are some of the most popular fixed and variable home loans.
- Federal Housing Administration Insured Loans (FHA)
- Veterans Administration Loans (VA)
- Farmers Home Administration Loans (FmHA)
The interest in a variable rate loan has the potential to change every year. Variable loans are by nature fickle.
2) Duration of mortgage: short or long term
The standard mortgage last between six months to ten years. If the term of the loan is short, the interest rates will tend to be low. A short term mortgage is for two years or less and is appropriate for people who feel that the interest rates will drop in the future, just in time for renewal. A long term mortgage is for three years or more and most suited for people who believe that current rates are stable and reasonable and want the security of budgeting for the future. After the expiration of the loan’s term you can either renew the mortgage at the current rates or repay the balance principal owed on the mortgage.
3) Open or closed mortgages
Open mortgages are typically short-term loans that can be paid off at any time without penalty. Homeowners planning to sell in the near future or require the flexibility to make large, lump-sum payments before maturity generally choose these kinds of mortgages. Closed mortgages are committed after taking into consideration specific terms. If you want to pay off the mortgage balance you will have to wait until the maturity date or pay a penalty.
4) Conventional or high ratio
A conventional mortgage is one that is no more than 75% of the appraised value of the property. The balance amount is paid through your own resources and is known as down payment. If you have to borrow more than 75%, you will need a high ratio mortgage. If the down payment is less than 25%, the mortgage will have to be insured. The insurer will charge a fee which predicated amount borrowed and the percentage of your down payment. Fees range from 1% to 3.5% of the principal amount and can be paid up front or added to the principal amount of the mortgage.
If you have more questions about a home loan or are ready to apply for a home loan, consult the best home lenders in Rapid City, South Dakota when you sit down and chat with loan officers at Affiliated Mortgage.
A Little About Affiliated Mortgage
A Little About Affiliated Mortgage
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