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Mortgages and How to Choose the Right One

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couple reading contract carefullyAt least once in their life, an adult would have to sign an important agreement called a mortgage. It gives them the powers they need to purchase assets like a house, car, or fund their education. Because it’s a huge life decision, one should learn the value of preparation before getting into such agreements.

Finding a reputable mortgage company in Phoenix is a good start. But, as VIP Mortgage reminds, there are also things to keep in mind in choosing the right deal.

Know the different mortgage types

There are different mortgage types. The most general ones are divided between privately-owned and government-owned. Understanding the different mortgage types can help you determine which one is most suitable for you.

Check the interest rate

The interest rate should be discussed early on. Knowing the interest rates plays a huge factor in helping people decide whether the deal is worth taking. There are also different types of interest rates namely fixed and adjustable. Your choice would be dependent on the point to consider.

Check your financial standing

The first thing that people tell when you express your intention to apply for a mortgage is to have your credit score in good shape. That, along with your overall financial standing, will affect not just your chances of approval, but also dictate how you would be able to pay for your fees in the future.

Check your length of stay

The length of your stay will determine the kind of mortgage that’s right for you. If this new home will be your retirement home, then having a 30-year term would be ideal. But, if this will just be a stepping stone to get yourself settled and eventually buy a bigger property, then opting for shorter mortgage periods would make more sense.

Take your time and do ample research. These two things are the secret to finding a mortgage type that you will not regret in the long run.

Why Mortgage Rates Vary

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increasing interest for mortgage ratesThere are times when there’s an upsurge of home buyers, which follows the ebb and flow of the finance industry. One reason for the fluctuating number of loans is that borrowers try to get the best mortgage rate in Utah. The mortgage rate also differs between banks and other lenders, as well as between types of loans.

Factors That Affect Fixed Mortgage Rates

There are two kinds of loans: fixed and variable mortgage rates. A fixed mortgage rate uses an interest rate that doesn’t change for the life of the loan period. For fixed mortgage rates, the prices of stocks and bonds have an effect on the interest rate.

Government bond prices decrease when the stock market is booming, and increase when the market is index is going down. Bonds are important investments and have a positive relationship with fixed mortgage rates. When bond yields increase, fixed mortgage rates also increase. Consequently, when bond yields decrease, fixed rates also decrease.

Variable Mortgage Rates

Variable mortgage rates change monthly based on the lender’s prime rate. The prime rate is the one used in transactions between a lender and a prime borrower. This is lower than consumer rates and only used between lending institutions.

The variable mortgage rate is effectively the prime rate plus a fixed premium interest. This means that the monthly interest rate on the mortgage is directly related to the prime rate. The effect of the monthly changes may be gradual, but over the lifetime of the loan, the interest rate may fluctuate by as much as 2% or 3%.

Choosing the kind of loan to apply for is a matter of preference. Typically, variable mortgage rates offer smaller interest rates. However, the increase in the interest rate is not an isolated event. It usually means that there’s also a bigger effect on the economy. Variable interest rates are better rates in the long run. However, it’s hard to create a budget or a repayment schedule when the monthly amortization isn’t fixed.

Pick the Best Mortgage Plan Considering These 2 Things

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man holding a mortgage loan contract

man holding a mortgage loan contractNext to deciding on the house you’ll buy, choosing the right type of home loan is the most important decision you’ll need to make as you buy a home. The loan plan you pick bears a considerable influence on the total cost of the house.

As such, you need to give it some serious thought before reaching a decision. Typically, a fixed-rate mortgage is the most popular with homebuyer but that doesn’t mean that you should follow suit.

For the best results, you need to account for specific needs and circumstance. Only then can you reach a credible decision.

1. How high is your risk tolerance?

If you aren’t the one to gamble with mortgage rates, you are better off with a fixed-rate loan. The monthly payments remain constant through the loan’s lifespan. That way, you can project and predict how much money you need to meet your obligations.

However, it is worth noting that this assurance comes at a cost. In most cases, this fixed rate is higher than the prevailing interest rate. But on the flipside, the peace of mind that comes with knowing that no nasty surprises await you each month makes it an excellent choice.

As a result, it is popular with people who are risk averse or need a clear sense of direction.

2. How long do you plan to keep the house?

If you plan on hanging on to the house for a couple of years, say less than seven, you are better off with an adjustable rate mortgage. The initial years of this loan feature a fixed interest after which the rate adjusts according to the prevailing interest rates.

As such, if you plan on selling the house after a couple of years, you can take advantage of the lower interest rates. Just be sure to sell before the rates adjust.

Key to successfully buying a home is the ability to pick the best mortgage plan to suit your needs. Therefore, you need to approach the mortgage process with a bit of caution.

What is an Adjusted Mortgage Rate?

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Rate word written on wood cube with red background An adjustable interest rate is a mortgage loan that has an interest rate that is fixed for a certain duration known as the initial period. Your mortgage’s interest rate is likely to change depending on the interest rate index when this period elapses. When scouting for a mortgage loan, it is important that you understand how an adjustable interest rate is calculated.

The Adjusted Mortgage Rate

The standard base rate is the initial rate that experts quote, even in the best mortgage company. Salt Lake City lenders then adjust this rate after a certain period, and this is the adjusted mortgage rate. This rate often lasts for an accepted period that could range from one month to ten years depending on the agreement. This rate is very high when the duration set is too long, and it can be insignificant in case the period is short, such as within a month.

The Yield Curve

These varying rates depending on the market yield curve. This is the curve indicating how at the rates can vary within the holding period. If the curve is flat, then the rates are small. It is crucial for the borrower to understand this to make the necessary comparisons.

Consider the Adjusted Mortgage Rates

In case you don’t intend to stay long in a  house and intend to sell it before the first rate adjustment, then you shouldn’t overthink about the interest rate. If you intend to stay on a permanent basis, then you have to be prepared for the rate explosion after the initial period. It is necessary that you factor in the no change and worst-case scenarios in your consideration.

The interest rate is a major consideration when choosing a mortgage loan. It is even more crucial if it is adjustable. Take your time to learn about the interest rate movement before making a decision.

Four Ways to Lower Your Monthly Mortgage Payments

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Man holding a pen pointing to a mortgage document

Man holding a pen pointing to a mortgage documentYour mortgage may most likely be the biggest monthly expense you have. Such a large expense can make things hard when you have a tight budget. This is true even if you ask the best mortgage company in Utah. You may sometimes wonder if there is any way to reduce your monthly mortgage payments. Fortunately, there are ways to do just that. Take a look at the list below to find out the different ways you can lower your monthly mortgage payments.

Refinance Your Mortgage

Many homeowners choose to refinance their mortgage for an extended period. It takes the remaining balance and recalculates the payments for another set term, reducing monthly payments. You can refinance your mortgage, yet refinancing means you pay even more in interest. Refinancing may a last resort instead of a first choice.

Recast Your Mortgage

You may have a tight monthly budget, yet if you become blessed with a large bonus or some other sum of money, you can use that for mortgage recasting. In recasting, you pay toward your mortgage principal with the large sum of money, and your loan will be subsequently re-amortized. You will have lower monthly payments as a result.

Modify Your Mortgage

When you see a looming financial hardship ahead of you, you can ask for a loan modification from your lender. A loan modification involves the restructuring of your loan in some way to allow for lower monthly payments. Financial hardships include unemployment or demotion.

Cancel Your Mortgage Insurance

When you have more than 20 percent equity in your home, you can cancel the mortgage insurance in your loan. The cancellation results in less monthly payments and a lower interest rate. You can ask your mortgage company if you qualify for mortgage insurance cancellation.

With the measures above, you can finally have a chance at lowering your monthly mortgage payments. Ask your financial advisor about each measure to find out which one will work best for you. You can finally have a freer monthly budget once you have dealt with your mortgage.

Types of Mortgages That Are Common Today

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Mortgage loan agreement applicationA mortgage doesn’t always involve a 20% down payment and paying a fixed amount for the entire 30-year term. There are various types of mortgage that you can choose from.

City Creek Mortgage shares the common mortgage types that will help you decide which one is right for you, and at the same time get the most preferential mortgage rate in Utah.

Fixed-Rate Mortgage

This is the most commonly used kind of home loan today, as well as the least difficult to understand. You will be required to pay the same amount monthly, although the ratio of the principal vs. the interest in your payments will change over time. The rate of interest is locked in upon loan closing, so you will not be affected by interest rate fluctuations. While you will not suffer from higher interest rates, you stand to lose in case the rates decline.

The required down payment is usually high. Most lenders ask for 20% to avoid paying for expensive mortgage insurance. A fixed-rate mortgage loan is typically offered for a term of 10, 15, or 30 years. The 30-year term is the most popular.

Adjustable-Rate Mortgage (ARM)

An ARM makes owning a home more accessible to more homebuyers. Lower down payments are usually required, as well as lower initial interest, and lower initial monthly payments. The low interest is fixed for a given period. In general, the shorter the period, the more preferential the rate. The rate then rises and falls from time to time, depending on the financial index.

The main disadvantage of this type of mortgage is when your loan starts to adjust just when the interest rates are on the rise. This can make the task of projecting your expenses a bit tricky, and it can be quite costly if you intend to refinance your existing loan with a fixed-rate mortgage.

While there are other types of mortgages available, these two are the most common. While each type has its own set of advantages, there are also downsides to consider.

Essential Shortlist of Ogden Housing Grant Requirements

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Housing Grant in Ogden

Housing Grant in OgdenFor Ogden, Utah, helping households with permanent settlement in the city is important for its growth and advancement. Because of this, the local government has prepared a number of different programs that can help low-income households purchase, repair, and improve their homes. For expedited loan and grant applications, it would be best to have the following information on hand.

Your Household’s Financial Information – Ogden’s housing grant program, Own in Ogden, is limited to households of a certain amount of income depending on the size of the household. Therefore, it’s important that you truthfully declare your household’s income and have the necessary documents to support it. The same applies for the other home loans offered, with the addition of personal credit information. These data will reflect your ability to pay for your requested loan.

Your Property’s Information – For the grant, you would need to provide the title of the property, any documents that show the price or your intended purchase, and if its state of construction. For the loans, you would also need the aforementioned papers, plus documents that prove that you are the owner of the property as well as information on any loans that you had before related to the said property. This information gives an idea of how much you will need to purchase or improve your target acquisition.

Other Related Information – For both grants and loans, you would need to provide the appropriate and completely filled-out application forms, notes someone from Wasatch Peaks Credit Union. Loans generally require a bit more information from you than a grant application. Also, you would need to provide other pertinent information, such as personal identification, what work will be done with your loan request, as well as any existing insurances that you may have.

Getting a home in Ogden or having it repaired or improved can be easy as long as you have all the requirements and information on hand. It can also be made simpler by working with the right financial service provider. Do choose carefully as your financial representative should be efficient and trustworthy just so you know you’re getting the best deal.

How High LTV Can Keep You From Refinancing Your Mortgage

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Mortgage Refinance in Utah

Mortgage Refinance in UtahAs interest rates in Utah are at record lows, many homeowners are keen to refinance their mortgage as soon as possible. This is generally a sound move, particularly if you have no plans to sell your house and change residences in the near future. With a much lower rate, you could save thousands of dollars over the lifetime of your new, refinanced loan.

But just because you want, you can get. A refinance is technically a new mortgage, which you must apply for first. Even if you have qualified for a home loan in the past, it doesn’t necessarily you can qualify this time around.

In many cases, mortgage refinance applicants are denied for different reasons. Of all culprits, a high loan-to-value ratio, or LTV, is the most notorious.

You are a Big Risk

If your LTV is well above what lenders consider acceptable, expect a lot of doors to close. This is because a high LTV means you lack enough equity on your property. The smaller ownership you have on your home, the lesser inclined you are to keep paying — at least in the eyes of lenders.

More often than not, having a high LTV (or worse, negative equity) could single-handedly lead to denial.

You Have to No Option but a High Interest Rate

If you’re lucky, some lenders would still agree to let you refinance your mortgage in Utah — for a steep price. Because you have less equity at stake in the deal, industry expert City Creek Mortgage explains that you’re subject to a higher rate.

This might defeat the purpose of your refinancing in the first place. Instead of saving you money down the road, the new mortgage might do little to lower your expenses, and only reset the clock with a fresh term.

You Might Have to Keep Your Current Loan

The magic number is 80%, so if the appraisal shows that you are yet to own 20% of your property, you might have to count more months of repayment to bank enough “ownership”. Until then, refinancing your mortgage would remain a dream beyond realizing.

Fortunately, there are financial products that allow you to refinance despite your equity problems. The key is to speak with an experienced broker to discover and access these mortgages.

Keys to Avoiding Bad Mortgage Recommendations

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Mortgage in Salt Lake City

Mortgage in Salt Lake CityWhen you shop around for a mortgage, you’d meet two kinds of people: those who’d sincerely help you get a suitable deal for your situation, and those who’d rip you off the first chance they have.

At first, it’s impossible to tell who’s honest from who has malice, which is why you can only rely on yourself to figure out whose advice to take. Regardless if it’s your first time or not, you can avoid falling victim to bad recommendations by being diligent.

Familiarize Yourself with the Terms

Lesson number one is to learn how to speak the industry language. Many home loan borrowers agree to whatever is told to them without fully understanding what they really mean. Some deals look desirable at the surface, but actually costs more at a closer inspection.

The mortgage industry is full of fancy terms that’s confusing to average borrowers. Also, some lenders apply certain fees you wouldn’t hear from others. Point is, there’s always a reason for that. More than terms, you must understand the concepts behind every element in the deal to see the whole picture.

Do Some Legwork

Other than the basics, you should do a quick research on the company you’d be dealing with. By all means, every mortgage lender in Salt Lake City, Houston, Boston, or any city would put their best foot forward to attract business; but not all of them aren’t really what they seem.

Look for reviews on legitimate sites, and read what their clients have to say about them. Fact-check whatever they claim to see if what they boast really holds true.

Make Sure Everything’s Clear & in Writing

Lastly, words doesn’t mean anything unless they’re in black and white. Many lenders would promise you the numbers you want to hear, but wouldn’t deliver. You must lock it in to make the deal official.

Hear all the deals banks and brokers have to offer, but take every single one with a grain of salt. As you look for a mortgage officer you can trust, make yourself informed to avoid falling prey to anybody.