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FINANCING YOUR HOME
In this section I-RealEstate.com will
take a look at home financing and home mortgages. Not many of us
are buying a house for cash these days so being informed about home
mortgages is another vital step in the home buying process. There
are so many home financing options available for home buying today
it may be impossible to list them all here. We will give it a try
though. Traditional 10,15,20 and 30 Year Fixed Rate home mortgages
have been available to home buyers for years and usually are easily
understandable for anyone buying a home. Whether buying a home in
Michigan or anywhere else, these mortgage products are available.
These programs are simple. With a 10 Year Fixed Rate mortgage the
interest rate remains the same for the entire 10 years and you will
payoff your home in 10 years. The same applies with a 15,20 and 30
year fixed rate home mortgage. Now we will go into more detail about
adjustable rate mortgages. Adjustable rate mortgage were created
and became popular in the early 1980’s. Back then they were called
1 year adjustable or variable rate home mortgages. Today not only
are there 1 year adjustable rate mortgage, but 2, 3, 5 and 7 year
adjustable rate mortgages as well. They are all 30 year home
mortgages. These products offer a lower interest rate than the
previous fixed rates mentioned and will afford you a lower monthly
payment. Another way to describe them is 2 Year Fixed Rate, 3 Year
Fixed Rate, 5 Year Fixed Rate and 7 Year Fixed Rate mortgages. At
the end of the “fixed” period they then change to 1 year adjustable
for the remaining term. Example: With a 5 Year Adjustable Rate
Mortgage at an interest rate of 5% the rate will remain the same
(will not adjust) for the entire 5 year period. In the 6th
year the rate will adjust with the market every year for the
remaining 25 years. It can stay the same, go up or go down
depending on market conditions at the adjustment time. Those taking
adjustable rate mortgages from 1999 through 2005 came out ahead of
those taking 30 Year Fixed Rate mortgages and saved an amazing
amount of money in comparison. Most adjustable rate mortgages are
tied to either the 1 year treasury index or the Libor index. If you
know you are buying a home and are going to live in that home for 7
years or less one of these products will be best for your
situation. If you want a lower payment or need a lower payment to
qualify when purchasing a home the adjustable rate mortgage is for
you. Whenever you make a home purchase, speak with a participating
I-RealEstate.com referred loan officer for all the details on these
great home buying products.
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PRIVATE MORTGAGE INSURANCE
(PMI): Not
everyone understands what PMI actually is but it seems everyone
would like to avoid it if possible. Historically, banks would
only lend home buyers a maximum of 80 percent of the value of
the home they were buying. Let’s use a simple example of a home
buyer buying a house that will cost $100,000.00. Historically,
the bank, a savings and loan or thrift institution would give
the home buyer a mortgage for $80,000.00 and the home buyer
would have to have a down payment of $20,000.00. The banks felt
that lending over 80 percent to home buyers was too risky and
actually they still feel that way today. This obviously limited
the amount of people who could buy a house. In the 1970’s
insurance companies developed a product called private mortgage
insurance and thus PMI companies were created. The PMI Company
offers and sells this insurance to those home buyers with less
than a 20% down payment. The bank actually takes on a
percentage of the risk from the bank promising to compensate the
bank should the borrower default on the mortgage. It is good
for home owners, good for banks and good for the PMI companies.
In fact today, because of PMI companies there are many home
buyers who can finance up to 100% of the cost of the home. PMI
truly helps people trying to buy a house but have no or little
money for a down payment. PMI costs nothing upfront but adds
the monthly premium to the mortgage payment. The PMI payment
can be eliminated when the home buyer can show that the equity
in the home has reached an 80% level. PMI is not tax
deductible. |
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To help a refinance mortgage loan to fit your individual needs, our Lenders need to know about your current mortgage and your loan preferences. Whether you want to refinance to a 30-year fixed or an adjustable rate mortgage, Online Mortgage can help you find the loan that's right for you. Tell us about the type of financing you wish to obtain and your loan requirements. Be as accurate as you can, because the details you provide will help determine your options. Within just 24 hours, you'll receive a customized quote by phone or e-mail.
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