How to Compare Mortgage Loan Products

There’s no such thing as a one-size-fits-all mortgage. Some products are specifically for high-end buyers, whereas other products are geared toward borrowers with not-so-perfect credit. This is why blindly choosing a mortgage product is one of the worst things you can do when buying a place.

Shopping around may be a tedious job, but it’s the only way to find the right mortgage. Sure, lenders can assist and discuss options with you. However, you shouldn’t rely solely on their advice. You need to do your homework and pick a loan product that works with your financial situation. Here are four tips to help you when comparing mortgage loan products.

1. Make Sure You Understand Different Loan Terms

You may think a 30-year mortgage term is the only option, but there’s another term available to you. Depending on how soon you want to pay off your home — and how much you can afford — a 15-year mortgage might be a better match.

Some people don’t want to worry about a house payment for three decades. They’d rather pay off the loan as soon as possible and put their money to other use, such as preparing for retirement. This is why a 15-year mortgage makes sense; but at the same time, you’re also committing to a higher mortgage payment each month. However, if money isn’t an issue, a 15-year term has additional benefits. You can build equity faster and pay less interest.

2. How Much Cash Do You Need?

Consider how much cash you have available for mortgage-related expenses when shopping for a home loan. Unless you’re getting a VA home loan or a USDA home loan, you’ll have to bring money to the closing table.

If you have plenty of cash in the bank, a conventional mortgage can work. You’ll need a  minimum five percent down payment, or you can put down 20 percent or more to avoid private mortgage insurance. Then again, if you don’t have a huge bank account, or if you simply don’t want to wipe out your savings when buying a house, a low-down payment mortgage is another option.

An FHA mortgage only requires a 3.5 percent down payment. Also, some financial institutions have special loan programs for first-time homebuyers that include down payment assistance. Talk to your bank to see if you qualify for these programs.

3. What is the Credit Score Requirement?

Credit is a big factor when choosing a mortgage product. And unfortunately, a low credit score limits your mortgage options.

Conventional and FHA mortgages are two popular picks among buyers, yet the credit requirements differ. A conventional mortgage requires a minimum credit score between 680 and 700 (depending on the bank), whereas FHA mortgages do not have credit score requirements, although some banks impose their own rules and require a minimum score of 620.

4. Analyze Your Free Mortgage Quote

Savvy homebuyers get pre-approved for a mortgage before shopping for a home. This way, they know how much they can afford, and whether they meet the qualifications for a mortgage. However, it isn’t enough to get approved in advance, you need to carefully review the terms of a mortgage quote to ensure you’re getting the best loan.

Start by requesting a quote from at least two or three banks. As you compare mortgage quotes, look at different factors, such as interest rates and closing costs. Ideally, you should pick the loan with the lowest mortgage rate and closing costs. This results in a cheaper mortgage payment and reduces your out-of-pocket costs at closing.
 
Bottom Line
If you don’t have the best credit or the most money, you may feel that buying a house is out of your reach. However, with so many mortgage products available, there are options for most people. Take your time, research and compare products, and you’ll find an affordable loan.

source: totalmortgage.com

Average U.S. Rate on 30-year Loan Rises to 4.53%

WASHINGTON -- Average U.S. rates for fixed mortgages edged higher this week for the third straight week but remained low by historical standards.

Mortgage buyer Freddie Mac said Thursday hat the average for the 30-year loan rose to 4.53 percent from 4.48 percent last week. The average for the 15-year loan increased to 3.55 percent from 3.52 percent.


Mortgage rates peaked in August at 4.6 percent amid expectations the Federal Reserve would reduce its $85 billion a month in bond purchases. The purchases push mortgage and other long-term rates lower. Last month the Fed deemed the economy strong enough for it to reduce the monthly purchases by $10 billion.

Mortgage rates are sharply higher than they were a year ago when the 30-year fixed rate was 3.35 percent and the 15-year was 2.65 percent. That's contributed to a decline in home sales over the past three months.

Still, the average for the 30-year loan has been below 5 percent for nearly three years, a trend that has made home-buying more affordable.

Separately, the Commerce Department reported Thursday that U.S. construction spending rose in November at the strongest pace in more than four years, driven by solid gains in home construction and commercial projects.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

* The average fee for a 30-year mortgage rose to 0.8 point from 0.7 point. The fee for a 15-year loan remained at 0.7 point.

* The average rate on a one-year adjustable-rate mortgage was unchanged at 2.56 percent. The fee stayed at 0.5 point.

* The average rate on a five-year adjustable mortgage increased to 3.05 percent from 3 percent. The fee was unchanged at 0.4 point.

source:  dailyfinance.com

30- and 15-year fixed mortgages at 2-year high

Average U.S. rates for fixed mortgages rose this week to their highest levels in two years, driven by heightened speculation that the Federal Reserve will slow its bond purchases later this year.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan jumped to 4.58 percent, up from 4.40 percent last week.

The average on the 15-year fixed loan rose to 3.60 percent from 3.44 percent. Both averages are the highest since July 2011.



Rates have risen more than a full percentage point since May. Last week's spike comes after more Fed members signaled they could be open to reducing the bond purchases as early as September.

The purchases have helped keep long-term interest rates low, including mortgage rates.

Despite the increase, mortgage rates remain low by historical standards. And recent reports suggest the jump in rates has yet to sap the housing recovery's momentum.

In July, previously occupied homes in the United States sold at the fastest pace since 2009.

Sales jumped 6.5 percent last month to a seasonally adjusted annual rate of 5.4 million, the National Association of Realtors reported Wednesday. Over the past 12 months, sales have surged 17.2 percent.

On Long Island, home sales in July were also strong, the Multiple Listing Service of Long Island has reported previously.

Nationally, the National Association of Home Builders said last week its measure of confidence among builders rose this month to its highest level in nearly eight years.

Mortgage rates are rising because they tend to follow the yield on the 10-year Treasury note.

The yield has also surged on speculation that the Fed's stimulus will slow. It rose to 2.90 percent Thursday morning, its highest level in two years.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage rose to 0.8 point from 0.7 point. The fee for a 15-year loan increased to 0.7 point from 0.6 point. The average rate on a one-year adjustable-rate mortgage was unchanged at 2.67 percent.

The fee edged up to 0.5 point from 0.4 point.

The average rate on a five-year adjustable mortgage declined to 3.21 percent from 3.23 percent. The fee held at 0.5 point.

source: newsday.com