Should I choose a fixed-rate or an adjustable-rate mortgage?
When interest rates are historically low, like they are now, a fixed-rate mortgage makes good financial sense. Not surprisingly, the vast majority of mortgages originated today are fixed-rate. In fact, only about 3% of buyers are choosing adjustable-rate loans.
That said, while a fixed-rate mortgage is the best choice for the majority of homebuyers, there are some circumstances where an ARM may be better.
For example, if you expect to sell the house before the fixed-interest period ends and the rate starts to float, an ARM could end up saving you thousands of dollars. Or, during periods of falling interest rates, an ARM can allow you to get a low initial rate, and will save you money later if rates drop further.
Should I “lock” my interest rate?
A rate lock means that you’re guaranteed today’s mortgage interest rate for some predetermined period, typically 30 to 60 days.
If interest rates have been trending upward, it’s generally a good idea to lock in your rate.
While the prevailing mortgage rate doesn’t usually make a big move in a month or two, it’s certainly possible.
Should I get a 15-year or 30-year term loan?
This depends on how much you want to stretch your budget. If you can afford the higher monthly payments, a 15-year mortgage usually comes with a better interest rate than a 30-year version.
Not only will you pay off the house quicker, but you can save a tremendous amount of interest.
On the other hand, a 30-year mortgage will cost less per month, allowing you to afford a bigger or nicer house, or one in a better location.
How do interest rates affect your mortgage?
High interest rates bring higher monthly payments and increase the overall interest you’ll pay over the life of your loan. A low interest rate saves you money in both the short and long term.
Of course, just like you can’t time the stock market, it’s nearly impossible to time your home purchase with the best interest rates.
The past five years have held some of the most affordable interest rates ever, according to the Federal Home Loan Mortgage Corporation, and their recent forecast predicts the trend will continue.
When should I consider refinancing?
You should definitely think about refinancing if:
- You can lower your interest rate enough to justify the closing costs.
- You can refinance from an adjustable-rate mortgage to a fixed-rate mortgage.
How do you lock your interest rate?
Because mortgage interest rates can change day to day, locking your rate is an important part of the mortgage process.
Locking your interest rate guarantees a certain interest rate for a specific period of time, usually between 30 and 60 days.
What are mortgage points or discount points?
Mortgage points, or discount points, are a way to prepay interest to get a lower interest rate on your mortgage.
Each mortgage point equals 1% of your home’s value. That means if you’re getting a $250,000 loan and have two discount points, you’ll pay $5,000.
In most cases, a point can reduce your interest rate by one-eighth to one-quarter of a percent.
How do you know which home mortgage option is right for you?
With so many mortgage options out there, it can be hard to know how each would impact you in the long run. Here are the most common mortgage loan types:
- Adjustable-Rate Mortgage (ARM)
- Federal Housing Administration (FHA) Loan
- Department of Veterans Affairs (VA) Loan
- Fixed-Rate Conventional Loan
1
Qualifying
Most people are intimidated by the mortgage process. This section answer questions like:
- How to Qualify
- Credit Requirements
- Documents
2
Loan Types
There are many different types and terms for loans. This section covers the most popular options.
- Fixed Rate or Adjustable?
- 15 Year or 30 Year?
- Mortgage Points
3
Costs
How much does the home buying process cost? This section covers information like:
- Down Payment
- Closing Costs
- How Much to Save
4
Payments
How much can you expect to pay on your mortgage? This section covers loan management.
- How Much Can I Afford?
- Mortgage Payments
- Do Payments Change?
5
Timeline
How long does the whole process take? This page details answers to questions like:
- Average Timeline
- What happens At Closing
- Why It Takes Time
6
Getting Started
The best way to get started is to fill out a pre qualification form, that way we can help you 1 on 1 for your situation.