Taking Advantage Of Low Interest Rates: Should You Refinance Your Mortgage?

With mortgage rates on the lower side, the choice to cash in and refinance your mortgage may be tempting, but before you make that decision here are a few facts to help you decide if it is the best financial choice for you and your family.  Whether it is just to reduce the amount of interest you pay, or freeing up some income for other items or debts, there are several considerations to take into account.  Here are the more popular options for refinancing your mortgage.

Fixed Rate Mortgages

If you like the stability of a fixed rate loan because of your budget can’t handle unexpected fluctuation, then now might be a great time to choose this option.  With fixed rates lower than they have been in some time, this may save you money by either reducing your monthly payments or, if you keep your payment the same, reducing the principal on your loan.

Adjustable Rate Mortgages (ARMs)

If you’re planning to stay in a home for only a few years, or your income can handle changing monthly payments, then you can get an ARM for significantly less than a fixed rate mortgage.  Adjustable rate mortgages are also popular with people who may have difficulty qualifying for a loan at a higher fixed interest rate, as it lowers the monthly payment.

Home Equity Loans

When interest rates are low, it is a good time to take out a home equity loan.  This may allow you to keep your home if you are facing financial problems.  It is also a great way to finance home improvements.

No matter what decision you make concerning the mortgage on your home, keeping your options open, arming yourself with up-to-date knowledge on the markets, and seeking the advice of professionals will keep your investment safe.

 

FHA Loans: What They Are And Who Qualifies

In your house hunting you may have come across a mention of FHA loans.  FHA stands for Federal Housing Authority, and the loans available through this program are designed to help people qualify for loans and purchase homes more easily.  If you are wondering about getting an FHA loan for your home purchase, the first thing to do is to learn a little about them and find out if you might qualify.

FHA And HUD

The FHA is part of HUD—the U.S. Department of Housing and Urban Development.  It exists to help people who might not otherwise be able to apply successfully for a home loan purchase a home.  The FHA insures the loan against default, which means that if the buyer fails to pay the mortgage, the lender will not lose the money because the FHA will cover it.

Who Can Get An FHA Loan?

Just about anyone can apply for an FHA loan.  There are no income level requirements, either on the high or low end, and even people with some credit problems can qualify.  You will have to meet a certain credit level, however, and you must have a debt to income ratio that is acceptable for the program to prove you can pay the mortgage.

There are specific FHA loan programs for first time buyers, seniors, and people looking to purchase a “fixer-upper” home as well.  The many programs can suit just about any buyer.

Limits With FHA Loans

The main problem many people run into is that the limit on how much you can borrow on an FHA loan may make it difficult to purchase the house you need.  Allowable amounts are usually on the low end of the market, and it can make house hunting a challenge.  If you are willing to take on a home that needs some work, you will probably have better luck with an FHA loan.

If you need to buy a home with a low down payment and are having a little trouble qualifying elsewhere, an FHA loan might be a good option for you.  Every state has different laws and requirements for qualification, so check with your state to find out what the process will be.  FHA loans can help people get into a house who might not otherwise have the opportunity to buy.

 

Can You Buy A Home With No Down Payment?

Coming up with a down payment in today’s economy can be difficult.  In most cases the down payment is expected to be 20% of the purchase price, and in some markets where housing prices are high that can be nearly impossible for the average person to save.  So are there ways to get around this?  Can you buy a home even if you don’t have the down payment?  There are a few ways to get into a home in spite of lacking the required 20%.

The 80/20 Loan

Also known as a piggyback mortgage, an 80/20 loan is a simple way to get a home without a down payment, but it can be a bit more expensive—or a lot more.  Basically, you take out a separate loan for the 20% portion of the purchase price.  You are financing your down payment.  You then take out a larger loan for the remaining 80%.  The interest rate on the 20% loan is usually a lot higher than the larger loan, so the best bet for any homeowner is to pay it off as quickly as possible.

The 20% portion of the loan is usually on a shorter term than the larger portion as well, and may have a balloon payment.  This means, for example, that the loan might amortize over 15 years, but after 10 years a balloon payment is due—meaning you have to either refinance or pay the balance.  There are also some variations on this loan, such as an 80/15/5 loan, where you put down 5%, take out a 15% loan for the rest of the down payment, and then finance the remaining 80% as a standard mortgage.

100% Financing Loans

While this type of loan used to be easier to get, today fewer places offer them.  There are still some places where you can get 100% financing on your home, but be prepared to pay PMI—Primary Mortgage Insurance.  This is something that the mortgage company will charge to protect themselves against the possibility that you will default on the loan.  It is charged on any loan when more than 80% of the value is being financed in most cases.  These 80/20 loans avoid PMI by financing less in one loan.

It is possible to buy a home with no or very little down payment, and there are a few other special programs such as FHA loans out there to help.  Do your research, and be sure you know which option will best fit your budget.

 

Taking Advantage Of Low Interest Rates: Should You Refinance Your Mortgage?

With mortgage rates on the lower side, the choice to cash in and refinance your mortgage may be tempting, but before you make that decision here are a few facts to help you decide if it is the best financial choice for you and your family.  Whether it is just to reduce the amount of interest you pay, or freeing up some income for other items or debts, there are several considerations to take into account.  Here are the more popular options for refinancing your mortgage.

Fixed Rate Mortgages

If you like the stability of a fixed rate loan because of your budget can’t handle unexpected fluctuation, then now might be a great time to choose this option.  With fixed rates lower than they have been in some time, this may save you money by either reducing your monthly payments or, if you keep your payment the same, reducing the principal on your loan.

Adjustable Rate Mortgages (ARMs)

If you’re planning to stay in a home for only a few years, or your income can handle changing monthly payments, then you can get an ARM for significantly less than a fixed rate mortgage.  Adjustable rate mortgages are also popular with people who may have difficulty qualifying for a loan at a higher fixed interest rate, as it lowers the monthly payment.

Home Equity Loans

When interest rates are low, it is a good time to take out a home equity loan.  This may allow you to keep your home if you are facing financial problems.  It is also a great way to finance home improvements.

No matter what decision you make concerning the mortgage on your home, keeping your options open, arming yourself with up-to-date knowledge on the markets, and seeking the advice of professionals will keep your investment safe.