themortgagenews
With the decline in home sale prices and mortgage rates these days, many people are seriously considering getting their own house. California median home prices dropped 1.2 percent from July's rate of $252,000. In Los Angeles, the average home sale price for June to August 2011 was $295,312 based on 4,591 homes while a berkeley real estate has an average listing price of $769,693. With home sales up 10.2% to 37,734 from 34,239 last year, this might be the best time to buy the house you've been dreaming of.
One of the important things in buying a house is getting a mortgage loan. This, way you can obtain financing from a financial institution, usually a bank, to fund your payments to the seller for a certain period of time. Unless you have enough savings or liquid funds to purchase the property outright, you need a mortgage loan.
To apply for a mortgage loan, you should know how much your budget can allow and what type of home you desire. Acquire a copy of your credit report and check for errors so that any incorrect information can be disputed. The bank will get an appraisal of the property you are planning to purchase and this determines the home's market value for collateral in the loan.
There are several types of mortgage loans and it is important that you choose the one that best suits you. The two basic types are fixed rate mortgage and adjustable-rate mortgage. Most countries use adjustable-rate mortgage. Combinations of these two types are also available wherein a mortgage loan will have a fixed rate for a certain period then vary after the end of that period. Let's have a closer look at these two types.
Fixed Rate Mortgage
This is the type of mortgage in which the interest rate remains the same throughout the life of the loan. This is the most popular type of loan used, comprising almost 75% of the total home loans. The payment is amortized over the life of the loan which means that you will pay equal monthly amounts for the duration. It usually comes in terms of 30, 15 or 10 years, the most popular being the 30-year because the payment is lowest. The biggest advantage of getting this type of loan is knowing exactly what the interest and principal payments will be. This allows you to budget easier as the interest rate will never change for the whole duration of the loan. The rate that was agreed upon in the beginning is the rate you will be charged all throughout. The disadvantage, however, is that interest rates are higher than those of other types of loans so your monthly payments are also higher.
Adjustable Rate Mortgage
Adjustable-rate mortgage is the type in which the interest rate varies over the life of the loan. The rate is generally fixed for a period of time, after which it will periodically adjust up or down to some market index. The initial rate is usually 0.5% to 2% lower than the average 30-year fixed rate. A hybrid form of the adjustable rate mortgage features both adjustable and fixed-rate mortgages.
Mortgage, Loan, Fixed rate, Adjustable rate