Is This the Best Time to Buy?
Though we’re far from the housing bubble that burst in 2007, loan lenders are even more cautious than ever to lend mortgages to anyone with anything less than stellar credit history, but it’s still a great time to buy. Lower property values, along with lenders looking to regain lost income they lost due to foreclosures, means right now is prime time for buyers – if you qualify, that is. If you have good FICO scores, and adequate financial resources, your mortgage rate can be very low.
Mortgage Types
The rate you get will depend on the type of mortgage you end up getting. Below are the mortgage types available and the terms of each one to help you make a more informed decision:
- Fixed—These mortgages have fixed interest rates that typically start out higher than other loans, but end up being lower than national rates in later years. The interest rate stays the same throughout the life of the loan.
- Adjustable—The interest rate on these mortgages will start out lower to entice you into borrowing the money, but as the introductory period (typically seven years) ends, your rate will jump to whatever the current interest rate is. This mortgage type works best if you do not plan on holding a property for long and can sell it before the rate adjusts.
- FHA—This is a federal loan through the Federal Housing Administration, and is used for those who cannot qualify for a conventional mortgage. Interest rates will be a bit higher than conventional loans, but the lending restrictions will be somewhat more flexible.
- VA—If you have served in the military at one point or another, you may qualify for a Veterans Affairs (VA) loan. Mortgage insurance isn’t required, but you might need to pay for a “funding fee” when you borrow the money.
- USDA—A USDA mortgage is typically used in rural areas by small farmers and low income people to gain property. Interest rates for these loans will match the market rates, but the benefit to these loans is that applicants may be able to qualify for 100 percent financing.
- Interest Only—Interest only loans allow you to pay just the interest payment for a specific period, such as 10 years. This will give you a smaller payment each month as well as a lower initial rate. But, these will adjust just like the adjustable rate loans, and once the interest only period is over, you will begin to pay on the principal and the loan will amortize like a regular loan.
Compare Closing Costs
Closing costs will vary with each loan lender, so do your homework carefully. No matter where you borrow your money from, there will be three main parts to the closing costs: lender fees, third party costs and mortgage taxes. While mortgage taxes should always be the same, regardless of lender, you should review them as closely as anything else. Anything that does not look right or will cost more in the long term, walk away from.
Get the Best Deal or Walk Away
You do not have to accept any loan offer and can walk away from any deal. After you compare closing costs, and interest rates, if you can’t find a mortgage that suits you, you can just walk away until you find a deal that you feel more comfortable with. If we learned anything from the mortgage bubble crash of 2007, it’s that bad mortgages often bite the borrower in the end, ending in foreclosure. Be sure to choose the loan lender who will give you the best mortgage rate before buying that property, or face getting burned in the long term.