For current and potential home buyers in 2016
With the economy continuing to improve and mortgage interest rates sitting near record lows, 2016 is an attractive year for home buyers. The expected near-term rise in interest rates has also added a sense of urgency. We’ve put together these tips to help buyers in their decision-making process.
Mortgage Tips
1. Make sure your finances are in good shape
For many people, buying a house is the largest purchase they will ever make. With mortgages commonly paid over a 30 year period, it’s a huge investment of both time and money. Because of this, it’s crucial for potential buyers to be in good financial standing before committing to a mortgage.
As a reliable lender, Fellowship Home Loans carefully assesses each would-be buyer to make sure a mortgage wouldn’t create a financial hardship for them.
2. Explore down payment programs
Down payments for houses are often in the 10-20% range. That’s a significant amount of money that can take many years of scrimping and saving to build up.
If you can’t produce that kind of down payment, don’t give up on the dream of home ownership — we can help. We offer programs that require a down payment as small as 3.5%. And if you’re a Veteran, you can go through our VA Loans that offer as low as 0% down payments.
3. Find the right lender
Getting a mortgage through a commercial bank can be a lengthy, frustrating process. Banks offer mortgages as one of a long catalog of services and deal with too many customers to commit much individual attention. As a result, their closing times can end up taking months. Fellowship Home Loans specializes exclusively in mortgage lending. We perform all services under one roof and pride ourselves on our one-to-one relationships with our borrowers. This means we can close the same mortgage in weeks rather than months.
We also believe that consumers are ideal served by lenders who put their needs above earning a quick commission. We are lenders who vow never to take advantage of vulnerable buyers. To that end, we always keep our fees reasonable and our process transparent.
Banks offer mortgages as one of a long catalog of services and deal with too many customers to commit much individual attention.
4. Research loan types
Mortgages aren’t one-size-fits-all. Depending on your long-term plans, you have options:
Fixed-rate Mortgage (FRM)
An FRM is ideal if you’re looking for a reliable payment over an extended period of time (15 to 30 years). With this type of loan, you’ll pay more over the life of the loan, but you’ll have complete peace of mind.
Adjustable Rate Mortgage (ARM)
An ARM is better if you plan to stay in your home for a shorter time (less than 10 years). Most ARMs feature low introductory rates which are then adjusted every six to twelve months. Our ARM programs have a capped lifetime rate.
A conventional loan may be good for one person where as an FHA loan can be a fit for someone else. We tailor all of our loans to your unique needs. It’s not a one size fit all.
5. Factor in the cost of closing
Buyers are familiar with down payments but may be less aware of the closing costs associated with mortgages. Closing (or “going to escrow”) is the final formal step in getting a mortgage. Closing costs can be significant, and they can be shocking if you’re not expecting them. Recent surveys show that closing costs typically run between 2-5%, with the average payment sitting at $3,700.
We work hard to get you the most competitive closing costs. Many of our buyers report saving big on these costs by negotiating their mortgage through us. At fellowship home loans we’re going to make it the most economical and straight forward process.
Refinance Tips
6. Lower Fixed Rate
If rates are historically low, like they are now, and are projected to increase soon then you’re at a good point to refinance to a fixed rate that won’t fluctuate. This will save you a lot of money when rates go up. However, reducing the interest rate won’t just let you save money, but it can increase the rate at which you build equity in your home and decrease the size of your monthly payment.
7. Debt Consolidation
Your mortgage probably isn’t the only debt you have. Many people have car payments, student loans, credit cards, etc. Refinancing to consolidate your debt allows you to make one low monthly payment instead of several, and pay less overall every month. Also, unlike credit card interest, the interest on your mortgage is usually tax deductible.
Allows you to make one monthly payment instead of several.
8. Shorten the Loan Term
Another reason to consider refinancing is to shorten your loan term. When interest rates fall, homeowners often have the opportunity to refinance an existing loan for another loan that, without much change in the monthly payment, has a shorter term. Since the goal of most people is to pay off their house before retirement, this is one method to get you there. For example, if you have a 30-year mortgage, now may be a great time to consider refinancing. With record low interest rates, you may find that a 15-year mortgage is not much more expensive than the 30-year loan payment you have been paying.
9. Cash Out
If you have a large home improvement project, a child to put through school, or another big investment opportunity then refinancing for cash is also an option. A cash-out refinance happens when the borrower refinances for more than the amount owed. The borrower takes the difference in cash and uses it for the purpose they choose. Whether you should go with this option or not depends on how much you would save each month and what you want to spend the money on.
Take the difference in cash and use it for the purpose you choose.
10. Consolidate 1st Mortgage with Home Equity Line or Loan
Similar to debt consolidation, you can also consolidate your first mortgage with a home equity line or loan so you only have one payment. This is especially helpful if one mortgage has a higher interest rate than the other. Your option here would be to consolidate both debts into one with a low interest rate and save money on your monthly payment.
Takeaway
Entering into home ownership can be a long and trying process if you don’t find the right team to work with. Working with a lender that has your ideal interest at heart and operates with the morals and integrity you would want when you are dealing with your biggest asset, your home.
At Fellowship Home Loans, we operate in our daily lives inside and outside of the office with the biblical principles that we find so important these days. We are rooted by values and our only goal is to reach your goals. Contact us today to learn how we customize the process to help you!
