May 28th, 2015 9:39 AM by Jackie A. Graves, President
Price is only one cost related
to buying a home. Unless you are paying all cash for your home, you'll need a
mortgage loan. Rates are going up, and the terms of your mortgage loan will
impact how much your home costs on a monthly basis as well as how much you pay
in interest over the life of the loan.
are a number of things that impact the interest rate including the kind of loan
you are getting such as FHA, jumbo or conventional, whether your rate is fixed
or adjustable, how good your credit scores are, and how much money you are
putting down so that the lender can lend you less money.
The best way to lower the borrowing costs of your loan is to have your credit
in pristine condition. Lenders are requiring credit scores of at least 700 to
obtain the best rates, and in some cases, higher scores are needed. In other
words, the loan rate that you see advertised may not apply to you and your
loans for upscale homes are above normal qualifying limits, so their rates are
loans require 20% down as payment from the borrower, while FHA and VA loans
require less, but they may cost more in other ways. For example, FHA loans
require private mortgage insurance, and they have more exacting requirements
for the condition of the home.
with less than 20% down cost more than loans with 20% or more down. That's
because the lender is assured that the borrower is less likely to walk away
from a large cash investment. If you put less than 20% down, you may have to
obtain mortgage insurance with the loan, so that the lender is paid in case of
a default. Your mortgage insurance should end when you've been in your home for
at least five years or if home values have risen giving you approximately 22
choose a fixed rate or an adjustable rate. If you plan to be in your home less
than three to five years, an adjustable rate might be preferable, but if you
aren't certain, a fixed rate is better.
most expensive loan is a 30-year fixed rate mortgage, but the advantage is that
the cost of your loan won't go up, because the rate is secure, although you may
pay more as time goes on for property taxes and hazard insurance. If you want a
shorter term, your rate will go down and you won't pay as much in interest, but
your monthly payment will be higher. However, more of your payment will go to
reducing principle in a shorter term loan.
can qualify for a $360,000 home at 5%, your P & I (payment and interest)
would be $1,933. But when interest rates fall, you can afford "more
house." At 4%, you could qualify for a $400,000 home and your P& I
would be $1,910.
the National Association of REALTORS® Chief Economist Lawrence Yun,
mortgage interest rates are likely to move higher. "The long-term mortgage
rate generally gets its cue from the 10-year Treasury borrowing rate, because
most mortgages get retired within 10 years from people moving to buy a new home
or because of refinancing," says Yun. "The 30-year Treasury has
already started to move up, and the 30-year mortgage rate will soon follow the
better to buy a home and let it lose a little value that can come back later,
than to pay more for an interest rate that can't be lowered.
Written by Blanche Evans – To view
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