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:: HOME :: CREDIT CARDS :: LONG DISTANCE :: INTERNET SERVICE :: LOANS · Main Page · Auto Loans · Home Equity Loans · New Mortgage Loans · Refinance Loans · Student Loans  Loan Consolidation New Student Loans Tips and Advice Calculators· Lines of Credit · Debt Consolidation · Credit Report & Score · Tips & Advice - New! · Calculators - New! · Loan Glossary · Loan FAQ · Info & Resources :: CELL PHONES :: INSURANCE :: ONLINE BANKING :: KNOWLEDGE :: MORE |
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Loan Tips and Advice Center Topic: New Mortgage Loans See the subtopics menu for tips and advice about new mortgage loans. For additional information about loans, see the topic list directly below.
 Mortgage Loan TermsWhat is the difference between fixed rate mortgages and ARMs? There are many different types of new mortgage loans out there. One of the first decisions you will have to make about your potential mortgage loan is whether you want to obtain a fixed rate mortgage or an adjustable rate mortgage. Fixed rate mortgage loans have constant interest rates that doe not change for the life of the loan. In other words, if you start out with a 6% interest rate on your fixed rate mortgage, the interest rate will stay at 6% until the loan is paid off or you refinance the loan, regardless of fluctuating market interest rates. An adjustable rate mortgage, on the other hand, features an interest rate that is fixed for a predetermined amount of time and then becomes an adjustable rate for the remainder of the loan term. Although adjustable rate mortgage products vary from lender to lender, most lenders offer adjustable rate mortgages that adjust on an annual basis with a maximum adjustment cap. For example, a 5/1 ARM would be a loan that has a fixed rate for the first five years and then every year thereafter the loan would be subject to adjustment, based on whatever interest rate index the lender uses. If this particular 5/1 ARM featured a 1% annual cap and a lifetime 5% cap that means that every year the interest rate would not raise or lower more than one percentage point, and over the entire life of the loan the rate would not go higher or lower than fiver percent of the original interest rate. Although adjustable rate mortgages often have lower initial interest rates than fixed rate mortgages, there is always the potential for the interest rate to eventually become much higher. Fixed rate mortgages can offer a consistency that isn't available with ARMs. See our ARM vs. fixed rate mortgage calculator to see which option might be right for your financial situation. ^ Back to top Find the Best Interest RatesHow can I get the lowest mortgage loan interest rate? Finding the best interest rate for a mortgage is often a top priority for those borrowing, as it should be. Mortgage interest rates can vary depending upon both the lender you choose and also the information you provide on your application. Lenders look at your credit history along with how much money you have available to you and your financial obligations. Interest rates that mortgage lenders advertise are usually the rates for applicants with excellent credit and a low debt-to-income ratio. For this reason, if you are approved for a mortgage loan - but you have blemished credit – you should not be surprised if the lender offers you a higher interest rate than the one prominently displayed on advertisements. Of course, there are some lenders who have one flat rate and you are either approved or denied at this rate, but some other lenders use the information listed on your mortgage loan application as the basis of what interest rate you will be offered upon approval. This is why it is so important to not only do some comparison shopping for the lowest interest rate, but also that you check your credit report before applying to make sure everything listed is correct and up to date. An erroneous error on your credit report can severely weaken your chances of being offered the lowest interest rate possible. ^ Back to top First Time HomebuyersWhat should first time homebuyers look for in a home loan? Many lenders offer programs for first time homebuyers, but if you have adequate funds for a down payment and a good credit score then you may not even need to make use of any of these types of programs. Specific first time home loans through lenders are sometimes nothing more than mortgage loans that have been divided up into two loans (a first mortgage and a second mortgage) in order to avoid a large down payment or private mortgage insurance. Assistance programs through the Federal Housing Administration and other organizations exist for first time homebuyers in the form of down payment assistance and other considerations, but these programs are generally reserved for applicants with low income and other inhibitive factors. The smartest thing first time homebuyers can do is to learn as much about the home buying process as possible while also taking care to not get caught up in a buying frenzy. Take your time to find the right home, and take as much time finding the right loan. You may be able to find a lower interest rate and better terms with a loan that isn't even designed for first time homebuyers. ^ Back to top Interest Only Mortgage LoansWhat is an interest only mortgage loan? Interest only mortgage loans result in a lower monthly payment because borrowers are only required to pay an interest payment each month, instead of paying on both interest and the principal balance. Although the monthly payment is lower, potential problems can arise when borrowers don't make an effort to pay above and beyond the required payment. Interest only mortgages are ideal for people who need the lowest monthly payment possible for one reason or another. People who are self-employed or who work on a commission basis sometimes choose interest only mortgages because this type of loan allows them to make large principal payments during months when their income is substantial, and then lower monthly payments during slimmer months. If you are interested in this type of loan, it's a good idea to make additional principal payments beyond the minimum requirement as often as possible. If additional principal payments are made, the original balance of the loan will be slowly decreased over time. Paying down the principal balance can be beneficial for many reasons, including the fact that it will decrease the amount of interest the borrow will pay in the future. ^ Back to top Mortgage Loans DemystifiedIs applying for a mortgage loan a complicated process? Mortgage loans aren't nearly as complicated as one might think at first glance. The mortgage loan process either begins with an applicant seeking a pre-approval with no home specified or instead arriving at the application process with a specific home in mind. The lender approves or denies the application based on several factors, including: The creditworthiness of the applicant, the debt-to-income ratio of the applicant, the market value of the home versus the sales price, and several other factors. After approval is granted, the lender sets out to make sure the home is worth as much as the sellers claim it is worth by requiring an appraisal. The lender also does a title search to make sure the sellers are the only people with a legal right to claim the home. If everything comes back clear then a closing is scheduled. Closing is nothing more than the conclusion of the application process, and it involves signing all the paperwork and actually acquiring the key to the home. Mortgage loans don't have to be intimidating because once you understand the overall process it can really be quite simple. ^ Back to top Mortgage Loans with Bad CreditCan people with bad credit get approved for mortgage loans? Having less-than-perfect credit does not necessarily make it impossible to get approved for a mortgage loan, but you should be aware that bad credit mortgage loans do not generally feature low interest rates and there can be plenty of additional fees involved. Mortgage loans for people who have bad credit are referred to as subprime mortgage loans. With subprime loans, the applicant cannot get approved for a mortgage loan through traditional methods. Plenty of lenders specialize in this type of mortgage loan, and some other lenders have special programs for applicants with bad credit. If you are in a situation where you want to apply for a mortgage loan but have less-than-perfect credit there are a few things you can do to increase your chances of getting approved. Lenders do not look exclusively at credit scores, and subprime lenders especially will look at the application as a whole and consider other factors such as your income, your debts, and the amount of money you have in savings. In order to increase your chances of getting approved for a mortgage loan you should try to pay your current debt down as much as possible while also padding your savings account with as much money as you can. You should also take the time to research the lowest interest rates for subprime mortgage loans. Just because you have bad credit it doesn't mean that you should accept the first lender you find without regard for the interest rate and fees. ^ Back to top Mortgage Guarantee ProgramsWhat is a mortgage loan guarantee program? Both the Federal Housing Administration (FHA) and the Veterans Administration (VA) offer home mortgage guarantee programs. A loan guarantee is not a loan; the guarantee means that lenders can rest assured that if a mortgage loan goes into default and winds up in foreclosure, the guaranteeing organization will pay the remaining balance to the lender. Not every lender will work with an FHA mortgage loan or a VA guarantee loan. There are additional specifications that must be met and both the FHA and the VA limit the number of fees that can be imposed on a borrower. Borrowers can usually manage to get approved for an FHA or VA mortgage with little or no down payment. FHA loans are available to applicants within certain income levels, and VA loans are only available to veterans who served a specific amount of time within the military. Interest rates for both these types of loans may be slightly higher than interest rates on conventional mortgage loans. These can both be great programs for applicants who do not have substantial incomes or down payments and fit the criteria needed. ^ Back to top
Should you refinance your existing mortgage? This calculator can help you that find out. Enter the specifics about your current mortgage, along with your current appraised value, new loan term, new rate and closing costs. Together, this can determine how much refinancing might save you overall. · Calculate how much you could save in interest
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