September 14th, 2018 8:46 AM by Jackie A. Graves, President
you have signed a contract for the purchase of your new home (or condominium or
cooperative apartment), and assuming you do not have all of the cash in your
bank account, you will need to obtain a mortgage loan.
many different loans on the market - and many different loan programs from
which to choose. You should contact at least three different lenders, and ask
them to give you a list of the loans which they can offer you. Take careful
notes, and remember one important thing: do not give any lender any money until
you are absolutely certain this is the lender - and this is the loan - you want
basic loan programs are as follows:
1. Conventional: this type of loan in generally available from a bank, a
mortgage broker, or a credit union. Within the category of conventional loans,
there are various options available, such as a fixed 30 year loan, or an
adjustable rate loan (called an ARM).
on a periodic basis, although in most cases they will run for a period of
thirty (30) years. Generally speaking, the shorter the term of the adjustment
(such as a one year ARM) the lower the initial interest rate will be. However,
when the adjustment period comes around, the interest rate for the next
adjustment will either go up or down, depending on the economy at the time of
the adjustment. When interest rates are falling, an ARM seems like a good deal.
However, when interest rates are rising (as they are now doing), the consumer
who obtains a one-year ARM is almost guaranteed to see the interest rate hike
as high as 2 percentage points at the end of the first year.
This is not a
complex issue, and all lenders have (or should have) a written explanation of
the way their particular ARM works. Read it carefully and seek assistance from
your financial and legal advisors if you have any questions.
2. VA Loans: This type of loan is generally available from mortgage
brokers, It is called a VA loan, since only military veterans can obtain such
loans. They are guaranteed by the Veterans Administration. There are certain
conditions which you must meet if you want a VA loan, and you should make sure
that your potential lender provides you with all the details, up front.
3. FHA loans: This loan is insured by the Federal Housing Administration.
FHA will guarantee the lender against a default by the borrower, but the
borrower will have to pay an insurance premium for this coverage. Once again,
there are conditions which must be met before such loans can be obtained, and
you should discuss all these terms with the potential lender.
It is not
possible in a short article to fully discuss all the various mortgage loans on
the market. Furthermore, creative lenders are always coming up with new
programs in an effort to be competitive. However, not all these loans are in
your best interest.
shop around, and don't accept the first loan that is offered. While the real
estate agent and often the seller may give you loan information - and the name
of potential lenders - only you can make the final decision as to what is best
for you. After all remember that the life of the loan may be as long as 30
years — and that's a long time to be stuck with an uncomfortable loan.
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