Posted by Elizabeth Dennis on August 8, 2011 | No Comments
When purchasing a house either for the first time or for the fifth, one of the most important things to look at is the interest rate. Because interest rates change on a daily basis, it is important to keep up with the general trend and try to get the lowest rate you can. This is because even a difference of 2% can save you thousands of dollars over the life of the mortgage.
Daily mortgage rates are based on the simple concept that banks and other lending institutions make money when they loan you money. This is where the interest rate comes from. You are paying the bank back more money than they originally lent you so; they are making more in the end. However, your bank is also borrowing money, only they go to the federal government for funds. These loans are associated with the Federal interest rate which is otherwise known as the prime rate or the overnight borrowing rate. Because the bank is also borrowing money, they want to make more off of you than they owe, so the mortgage rate you get will always be higher than the prime rate.
There are many factors that go into determining the daily mortgage rate. Some of these include the return your bank or lending institution is making on short term investments, medium length investments such as treasury notes and long term investments and loans such as treasury bonds.
Currently, the daily mortgage rate for a 15 or 30-year fixed loan are some of the lowest they have ever been. This generally signals a point where it is a good time to buy a home. This is especially true if you lock in the low rate over the course of the loan and you will find yourself saving significant money when interest rates eventually go back up.
Posted by Elizabeth Dennis on July 18, 2011 | No Comments
If you are thinking that 2011 might be the year you want to purchase a house, you are probably not alone. And since most people have to have a mortgage to pay for that house, there are some steps you can take now to help make the process a little easier and worry free.
Getting a mortgage can be a time consuming and confusing process. One of the best ways to deal with it is to break down the entire process into several different steps. This will help keep you from getting overwhelmed and also from missing an important phase.
One of the first things you should do when considering buying a house and deciding to get a mortgage is to determine just how much house you can afford. This is typically a function of two things: how much you can borrow from a bank or credit union versus how much money you can afford to put down. It will also depend a great deal on how much money you make. While there is no magic number for the perfect home or getting the perfect mortgage, you typically don’t want to spend more than 25% of your take home pay on a house note every month. In order to determine how much you can spend, take some time to insert your monthly income, expenses, term of loan, down payment and interest rate into an online mortgage calculator.
Next, you will want to determine what type of mortgage you want. If you can, determine if you can afford to take out a fifteen year mortgage rather than a thirty year one. This will not only save you thousands of dollars in interest, but you’ll own the house much sooner.
Before applying for a mortgage, you will also want to shop for one. Many people still choose to go to their local bank and apply for one there. This is especially true when you might get a small discount in interest rates if you already have accounts at that particular bank. However, a more and more popular option is to look for a mortgage broker. These brokers act as a go between for you and lending organizations. They take care of all the paper work and help find you the best deal possible by shopping your mortgage application to numerous different lenders. Do keep in mind, however, that they will charge a percentage of the loan for their services.
Next, get your finances in order and determine how much money you can afford to put down on your new house. While no money down loans are almost a thing of the past, you can still find loans and get mortgages with down payments of as little as 3.5-4%. However, you ideally want to be able to put down 10-20%. This will not only make you more attractive to a lending institution, but will save you money and interest. In addition, you will want to get a copy of your credit report. Those with a FICO score of at least 730 will get the best rate. For FHA loans, you will need a score of at least 690. Finally, try to be debt free and have at least six months of savings in the bank in addition to the money you have earmarked for the down payment.
If you follow the above the tips, you will make the entire mortgage process much easier and increase your chances of being approved with an acceptable interest rate.
Posted by Elizabeth Dennis on July 5, 2011 | No Comments
When attempting to either purchase a new house or move up by buying a larger one, the first thing any home owner should do is see what type of house they can afford. This is where mortgage calculators come in. You can either go to a bank or credit union to see how much you can afford or you can just look online.
A quick internet search of mortgage calculators will turn up any number of results. While each one will be slightly different from the others, they will all ask for the same basic information. As a result, it is a good idea to have some figures in front of you before you start your calculations. All mortgage calculators will ask for the price of the home you are looking to buy, the loan amount, the interest rate, length of the terms, property tax and any PMI. Some may even ask you about your credit, and if the loan is for an original loan or for a refinance. Some mortgage calculators will even let you see how much you can save over the life of the loan by adding additional funds to your payment each month.
Once you have entered all the pertinent information, the computer will do the calculations for you and you will see the results. Usually, you will see what your monthly payment is going to be, how much you are going to be paying over the length of the loan, the total interest paid, the total tax paid, the payoff date and the monthly PMI payments. Some people choose to pay their home loan in a bi-weekly fashion rather than just one payment a month. This can save you years on your mortgage and as a result thousands of dollars. Some of the more in depth mortgage calculators will give you this information as well.
When looking online to find a mortgage calculator, it may be a good idea to consult several different ones from different sites. This will ensure that you are getting the same result and you can feel confident that as long as you were honest putting in the information, the findings are correct.
As you determine how much house you can afford there are several things to keep in mind. Be sure to know how much money you bring home each month. Once you get the final results from your calculations, make sure the monthly payments aren’t more than 25% of your take home pay. If the payments are too much, you will run the risk of falling behind as too much of your money is going toward one thing. You can get around this by either putting down a larger down payment or looking for a cheaper house. In addition, try to clean up your debt and have at least six months worth of savings in the bank in case you encounter either sickness or a job loss. This will help you be more attractive to lenders and you won’t have to worry as much about loosing your house and facing a foreclosure.
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