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Research Loan Types
Before you get locked into a loan, arm yourself with information about the different types of loans available to you. Research the pros and cons of each loan type and decide which one is right for you.
Prudential Utah Real Estate has an affiliation with Mortgage companies for the sake of our valued customers. This alliance gives us a very unique approach to the home financing market. Mortgage companies provides excellent customer service (and we insist on that) through their in-house processing, closing, loan approval and funding. We know you’re busy. This affiliation allows you hassle-free, one-stop mortgage shopping. Our affiliation assures qualified buyers excellent quality mortgages at the best possible interest rates.
We offer this loan service anywhere in Utah, particularly in the areas served by Prudential Utah Real Estate like Salt Lake County, Summit County, Davis County, Wasatch County, Weber County and Utah County.
There are many standard loan types and many forms of “creative financing” available. Choose a loan type that creates the most affordable and realistic scenario for you based on your current financial situation. Take into account the expected (and unexpected) changes in the future. Consider changes to your personal situation and forecasted changes in the economy overall.
Fixed vs. Variable Rates
There is a major difference between a fixed and an adjustable mortgage loan, sometimes called a variable loan. A fixed-rate loan guarantees your interest rate will not change, regardless of economic conditions. On the other hand, an adjustable rate mortgage or ARM features an interest rate that can fluctuate during the life of the loan.
In today’s uncertain economy, it’s nice to know exactly how much you will pay for your mortgage. However, you can expect to pay a higher interest rate for the convenience of certainty.
While an adjustable rate mortgage or ARM is less predictable, the lender assumes less risk. If mortgage interest rates go up, so will your loan payments. Mortgage lenders are guaranteed to get an interest rate on their money that reflects current market conditions. Many adjustable rate mortgages have an initial period of a fixed rate for 3, 5 or 7 years. The initial fixed-rate period will most likely feature a lower interest rate than a traditional fixed-rate loan. When you secure an adjustable rate loan, you are basically betting on future market conditions as after the fixed-rate period, your loan will convert to an adjustable rate. Before you sign on the dotted line, make sure you understand the conditions of your home loan.
Another common loan type is a balloon loan. Some people call it a reset mortgage. It starts with a fixed interest rate. The interest rate is usually fixed for a certain period of time. The initial fixed rate will be lower than a fixed-rate loan, but it’s a short-term fix. You and your lender will agree on the amount of time you have to pay the loan. At the end of that time, the entire balance will come due. Most people refinance their mortgages shortly before the balloon loan comes due. This can be a useful tool if you anticipate improved conditions in your personal finances or a lower mortgage rate in the future. However, there is major risk involved in a balloon loan. So many factors can influence your ability to get and pay a lower rate loan including radical changes in economic trends and personal life events that can hinder your ability to qualify for a new mortgage.
There are many government assisted loans for which Americans qualify. These guaranteed loans mean less risk for mortgage lenders because the government guarantees payment if you default. Securing a government assured loan could also mean a lower down payment. These are great loans for first-time homebuyers and lower-income families. Sometimes they come with strings attached that you may or may not be willing to live with in order to qualify for a new home loan. Some of these programs include:
FHA-Federal Housing Administration [http://www.fha.gov/]
VA-Veterans Administration [homeloans.va.gov]
Rural Development Services [www.rurdev.usda.gov/rhs]
These are certainly worth researching and can go a long way in helping you to realize the American dream.
Need more information? Get a quick, confidential evaluation before you begin your search for a Utah home.
- Union Park Office 801-990-1466
- Salt Lake Office 801-428-2928
- Redwood Road Office 801-270-7024
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