Mortgage Rate News

One of the more popular types of home mortgage right now is the adjustable rate mortgage (ARM). This is a type of loan where the mortgage loan interest rate adjusts as the mortgage market rate adjusts. Often an ARM comes with introductory rate that expires after six months to a year.

An ARM is often nice for first time home buyers because it usually comes with a lower interest rate, at least initially. This means lower payments. But there are some downsides to an ARM. Here they are:

• Pay more over the long run, since your payment goes up when rates adjust
• No set payment makes it a little harder to budget each month
• Build equity slower when interest rates go up

Many people are finding out now that interest rates are up over last year that they are stuck in an ARM that could keep going up. Refinancing is often a good choice for many with an ARM.

Hybrid ARM

Another kind of ARM is the hybrid ARM. A hybrid ARM takes some of the qualities of a fixed rate mortgage loan and some of an ARM. You start out with the mortgage interest rate fixed, but it only lasts for 3 to 10 years (5 to 7 is average). Then you switch to an adjustable rate. If you plan to move out of your home before the initial period is up, a hybrid ARM may not be a bad idea. However, once your initial term runs out, you end up with all the same problems of an adjustable rate mortgage.

Another type of ARM to be wary of is the option ARM. In this type of home mortgage, you find yourself making “creative” payments so that you can “afford” the house you want. The problem is that sometimes you get caught with negative amortization, which creates problems of its own.

Tags: mortgage loan interest rate, adjustable rate mortgage, home mortgage loan, hybrid ARM,
option ARM, mortgage market rates

Right now, the real estate market is suffering. But the lending market is suffering almost as much. Why? Because the subprime lending crash is still reverberating, and causing problems. Lending standards — especially in the subprime market — have been tightened. And, due to the increase in paperwork and documentation required to get approved, there is a bit of a backlog. This means that you could face losing your chance to lock in interest rates, or you may have difficulty getting everything squared away if you have unique circumstances.

There a couple of different ways to handle this situation, and they are addressed by Bernice Ross of Inman News. Here is what she says about applying at multiple lenders for your home mortgage:

The second way to handle this situation is to apply at two different lenders. The lenders don’t like it, but it can be a way to make sure that your loan will be approved. You can also achieve the same result by going through a mortgage broker who represents a number of different lenders. If there’s a problem at one, they can easily shift to a different resource. Alternatively, numerous online lenders have multiple sources to fund their loans.

As you can see, widening your options can help. That way, the first mortgage broker or lender to get you through is the one you can go with. Personally, I like the personal service one gets when you sit down face to face with a mortgage broker. Of course, I am also self-employed and have rather specific and unique needs. However, there are some great deals online, and if you have a situation that is fairly simple and straightforward, an Internet mortgage broker could be the way to go.

In today’s market, you need all the help you can get in preparing for and securing a mortgage loan in a timely fashion, so don’t be afraid to fully explore your options.

Tags: mortgage broker, lenders home mortgage, home mortgage loan, home mortgage,
applying home mortgage, subprime lending crash, real estate market

Yesterday, we took a look at what a home equity loan is. Today we will address the home equity line of credit (heloc). To be fair, this is technically another type of home equity loan. However, it operates as a line of credit (any line of credit is really another type of loan), and has a few differences from the standard home equity loan.

What is a home equity line of credit?

A home equity line of credit is just what it sounds like: the bank or mortgage broker offers you a certain amount of money, on credit, based on how much equity you have in your house. A line of credit is very similar in the way it operates to a credit card. You have a maximum amount that you can borrow, and it revolves, so as you pay it down, more continues to be available for you.

However, because the heloc is secured by your home, your available money is greater than it would be with a credit card. Also, this second mortgage interest rate is usually lower than a credit card interest rate. In some cases, the mortgage interest rate is even tax deductible on a heloc. Instead of getting your money in a lump sum, as with a more conventional home equity loan, you can take it out as you need it.

What is a heloc good for?

There are many uses for a home equity line of credit. Many people use them as a way to keep a window open for access to the value of their home. It is convenient, because if you find you need more money than you thought, you can simply withdraw more, without applying for another mortgage loan.

Perhaps the most popular use for a heloc, though, is when doing home improvements. Because improvements increase the value of the home, they often outweigh the costs of getting a home equity loan. Additionally, it makes it easier to fund each project, rather than re-applying for a loan each time you need to do something different.

The main pitfall to watch for is getting to comfortable with taking the money out with the home equity line of credit. Remember that it is still debt, and it still needs to be paid back with interest.

Tags: home equity loan, home equity, mortgage interest rate, home equity line of credit,
second mortgage, mortgage broker, heloc