Realty Mortgage as featured in MovingOn Magazine

Mortgage Matters

Featured in Moving On! Magazine July/August 2007

Do you have an Adjustable Rate Mortgage? Would you like to make the equity in your home work for you? Are you a first-time home buyer that wouldn’t know an escrow or APR if they walked up and knocked you over the head? Now days it seems that every time you turn on your television someone is talking about mortgages. For most people this talk is over their head and making the mortgage process very intimidating. Let’s explore a few of the options available for new home buyers and current home owners.

Are you in the market for a new home? Generally there are two types borrowers when it comes to looking for a mortgage. First is the borrower concerned mainly about monthly payment. These people watch the interest rates and pay careful attention to extra costs like mortgage insurance which is paid monthly. Next is the group mostly concerned with the amount of down payment it will take to get into their new house. Often they are willing to take a slightly higher interest rate in order to have a no down payment, or to have their out-of-pocket closing costs reduced.

Conventional financing provides many options from a zero down payment to as much as a 20% down payment or more. Purchasing with zero down payment is an excellent option for a first time home buyer or those with limited cash reserves. While this option allows you to get into your new home by paying the least amount of money at closing your payment will be a little higher and the overall cost long term is greater. This type of financing will have a slightly higher interest rate, and you will likely pay more per month in mortgage insurance (MI). As a general rule, the more money you can put down at the time you purchase your home, the lower your interest rate will be. Once you have 20% equity in your home you will not have to pay monthly mortgage insurance thus reducing your monthly payment.

FHA (Federal Housing Administration) is a government guaranteed loan program that has assisted many Americans in their dream of home ownership. FHA was designed to increase home ownership and is tailored to the first time homeowner. FHA requires a 3% down payment of the borrower’s own money, but at the same time gives them the benefit of a lower interest rate and lower monthly MI payments. It is important to note that this loan program has lending limits which vary by county. Boerne, TX has an FHA loan amount maximum of $200,160 for a single family home.

What if you currently own a home and are looking to upgrade? What if you want to move into a new area like this great Texas Hill Country? A Bridge Loan will allow you to use the equity in your current home as a down payment on your new home. This provides you some additional time you may need to put your house on the market and get it sold. Generally, Bridge Loans are done on a six-month term note allowing you to only pay any interest that incurs.

Interested in a Home Equity Loan? In most cases you can use the equity in your home to get additional cash for your current needs. Are the kids heading off to college? Would you like to get rid of some credit card debt? Would you like to make improvement to your home? In the state of Texas you have the opportunity to get a loan up to 80% of your home’s value for cash our purposes. One of most important things to consider when looking into a Home Equity Loan is that once you have borrowed against your home, your mortgage will be restricted to the specific home equity guidelines if you choose to refinance at a later time. Typically, home equity loan rates are a little higher and more specific guidelines must be met to qualify for these loan. A nice advantage to home equity loans is that in most cases the interest paid on these loans may be tax deductible.

Have you ever considered an adjustable rate mortgage? A couple of years ago, adjustable rate mortgages were all the rage. They allowed you to get a much lower rate for a fixed period of time. A few extra conditions applied and once the rate started to adjust it would typically go up quite a bit. Currently, there are many people who are now reaching the adjustment period of their loan. For some this can be quite scary time if they are not prepared because their mortgage payment could easily increase $100 or more per month. When offered an adjustable rate mortgage, ask yourself these questions. How long am I planning to live in this home? If you plan to sell prior to your adjustment period, this could be a great way to have a lower rate and gain equity in your home. Can I afford the new higher payment if my rate goes up? It is never a good idea to gamble on what the market will do in the next two to five years if you are not sure if you can afford the payment.

The idea of a mortgage is often a scary. For most people their house is the largest investment they will make in their life time. It is something to take serious but not to avoid. Consider the points we have made today. How much money do you have for a down payment? Would it be better to put more money down and have a lower payment or to save your down payment making a higher monthly payment but keeping reserves in your bank? How long will you be in the house? Is it a good idea to use the equity in my home to finance home improvements, pay off debt or maybe pay for college? As long as you seek advice from an experience mortgage professional and make a smart educated decisions, home ownership is much easier and less scary than you may have ever dreamed.