Mortgage Info for your Lake Norman Real Estate
Work with a professional banker, mortgage company or lender to select the mortgage that is best for you. A real estate agent can you give you only general information. Make sure you are pre qualified before you shop for a home so that you had initial counseling and are comfortable and confident when you make an offer to purchase.
What mortgage loan is the best for me?
How to select the best loan when buying Real Estate in Charlotte or Lake Norman
In order to make the best decision for yourself, it is important to understand the differences between loan types and to speak to an experienced loan officer that will be able to analyze your particular situation and goals. Here is some info we put together for you to give you basic information about a variety of loans.
Fixed Rate Loans
are those loans that start at a specific interest rate and remain at that rate no matter what happens in the financial markets. If your rate in 6% the day you get your loan, it will be 6% until you pay the loan off. Typically, fixed rate loans are written for a period on 30 years (360 monthly payments), or 15 years (180 monthly payments). Terms of 10 and 20 years are also available from some investors. In a fixed rate loan, lenders charge a premium to hedge against inflation. The borrower pays a premium to lock their rates for 30 years.
With an ARM (see below) rates change periodically, tracking the overall economy and this enables lenders to charge lower initial rates. Most people change their loans, either by selling their home or refinancing it, and have thereby paid more for their mortgage than necessary.
Adjustable Rate Mortgage (ARM)
Loans are more complex, as they have two components that determine the interest rate, the index and the margin. The index is the rate of a short term maturity, such as the Treasury bond or 6 month certificates of deposit. The margin is a static value, usually between 2 and 3%, which is added to the index to produce the fully indexed rate, which is the one you pay. The amount that the interest rate can change is limited to protect the consumer. It can usually only increase 2% per year and 6 % over the entire life of the loan. Start rates for ARM’s are typically a bit lower than for Fixed Rate loans.
It is important to discuss and fully understand the following factors when considering an Adjustable Rate Mortgage loan. Be sure to address each with your loan officer before deciding to apply for one. These factors are:
Adjustment Period A predetermined period of time. At the end of this interval the interest rate is adjusted, based on the index. Typically, this is an annual event.
Index The Standard used to track the change in the economy that will determine the direction and degree of rate change. Some indexes are less volatile than others.
Margin The percentage that will be added to the index to obtain the rate that your loan interest will adjust too.
Annual Cap The maximum amount the interest rate can increase per year.
Lifetime Cap The maximum amount the interest rate can increase over the life of the loan.
Hybrid Loans Hybrid ARM’s provide homeowners with a unique advantage because they adjust like an ARM but have an initial fixed rate from 1, 3, 5 or 7 years. Often they are advertised an 5/1 or 7/1 ARM’s. This can be “decoded” as meaning fixed for 5 or 7 years and then adjusting once every year.
Interest Only Loans
As the name implies, these are loans that are designed to have only the interest generated by the loan paid on a monthly basis. A “fully Amortized” loan, which is the traditional mortgage type, requires both the interest and principle to be paid each month. By only collecting the interest due each month, the monthly payments are reduced but no principle is paid.
Balloon Payment
After making payments for an agreed upon period of time, the entire loan balance becomes due and payable. There is the possibility of refinancing the loan at the time the balloon payment is due, but the lender is under no obligation to refinance the loan. It is extremely important that the borrower understands all of the term of this and any other loan type.
10 Questions to Ask Your Lender
Be sure you find a loan that fits your needs with these comprehensive questions.
1. What are the most popular mortgage loans you offer?
2. Which type of mortgage plan do you think would be best for us? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance usually is required if you make less than a 20 percent downpayment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
5. Who will service the loan? Your bank or another company?
6. What escrow requirements do you have?
7. How long is your loan lock-in period (the time that the quoted interest rate will be honored)?
Will I be able to obtain a lower rate if they drop during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?
10 Things a Lender Needs From You
1. W-2 forms or business tax return forms if you’re self-employed for the last two or three years for every person signing the loan.
2. Copies of one or more months of pay stubs from every person signing the loan.
3. Copies of two to four months of bank or credit union statements for both checking and savings accounts.
4. Copies of personal tax forms for the last two to three years.
5. Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, e.g., a boat, RV, or stocks or bonds not held in a brokerage account.
6. Copies of your most recent 401(k) or other retirement account statement.
7. Documentation to verify additional income, such as child support, pension, etc.
8. Account numbers of all your credit cards and the amounts of any outstanding balances.
9. Lender, loan number, and amount owed on other installment loans—student loans, car loans, etc.
10. Addresses where you lived for the last five to seven years, with names of landlords, if appropriate.
Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2004.
All rights reserved.
What mortgage loan is the best for me?
How to select the best loan when buying Real Estate in Charlotte or Lake Norman
In order to make the best decision for yourself, it is important to understand the differences between loan types and to speak to an experienced loan officer that will be able to analyze your particular situation and goals. Here is some info we put together for you to give you basic information about a variety of loans.
Fixed Rate Loans
are those loans that start at a specific interest rate and remain at that rate no matter what happens in the financial markets. If your rate in 6% the day you get your loan, it will be 6% until you pay the loan off. Typically, fixed rate loans are written for a period on 30 years (360 monthly payments), or 15 years (180 monthly payments). Terms of 10 and 20 years are also available from some investors. In a fixed rate loan, lenders charge a premium to hedge against inflation. The borrower pays a premium to lock their rates for 30 years.
With an ARM (see below) rates change periodically, tracking the overall economy and this enables lenders to charge lower initial rates. Most people change their loans, either by selling their home or refinancing it, and have thereby paid more for their mortgage than necessary.
Adjustable Rate Mortgage (ARM)
Loans are more complex, as they have two components that determine the interest rate, the index and the margin. The index is the rate of a short term maturity, such as the Treasury bond or 6 month certificates of deposit. The margin is a static value, usually between 2 and 3%, which is added to the index to produce the fully indexed rate, which is the one you pay. The amount that the interest rate can change is limited to protect the consumer. It can usually only increase 2% per year and 6 % over the entire life of the loan. Start rates for ARM’s are typically a bit lower than for Fixed Rate loans.
It is important to discuss and fully understand the following factors when considering an Adjustable Rate Mortgage loan. Be sure to address each with your loan officer before deciding to apply for one. These factors are:
Adjustment Period A predetermined period of time. At the end of this interval the interest rate is adjusted, based on the index. Typically, this is an annual event.
Index The Standard used to track the change in the economy that will determine the direction and degree of rate change. Some indexes are less volatile than others.
Margin The percentage that will be added to the index to obtain the rate that your loan interest will adjust too.
Annual Cap The maximum amount the interest rate can increase per year.
Lifetime Cap The maximum amount the interest rate can increase over the life of the loan.
Hybrid Loans Hybrid ARM’s provide homeowners with a unique advantage because they adjust like an ARM but have an initial fixed rate from 1, 3, 5 or 7 years. Often they are advertised an 5/1 or 7/1 ARM’s. This can be “decoded” as meaning fixed for 5 or 7 years and then adjusting once every year.
Interest Only Loans
As the name implies, these are loans that are designed to have only the interest generated by the loan paid on a monthly basis. A “fully Amortized” loan, which is the traditional mortgage type, requires both the interest and principle to be paid each month. By only collecting the interest due each month, the monthly payments are reduced but no principle is paid.
Balloon Payment
After making payments for an agreed upon period of time, the entire loan balance becomes due and payable. There is the possibility of refinancing the loan at the time the balloon payment is due, but the lender is under no obligation to refinance the loan. It is extremely important that the borrower understands all of the term of this and any other loan type.
10 Questions to Ask Your Lender
Be sure you find a loan that fits your needs with these comprehensive questions.
1. What are the most popular mortgage loans you offer?
2. Which type of mortgage plan do you think would be best for us? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance usually is required if you make less than a 20 percent downpayment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
5. Who will service the loan? Your bank or another company?
6. What escrow requirements do you have?
7. How long is your loan lock-in period (the time that the quoted interest rate will be honored)?
Will I be able to obtain a lower rate if they drop during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?
10 Things a Lender Needs From You
1. W-2 forms or business tax return forms if you’re self-employed for the last two or three years for every person signing the loan.
2. Copies of one or more months of pay stubs from every person signing the loan.
3. Copies of two to four months of bank or credit union statements for both checking and savings accounts.
4. Copies of personal tax forms for the last two to three years.
5. Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, e.g., a boat, RV, or stocks or bonds not held in a brokerage account.
6. Copies of your most recent 401(k) or other retirement account statement.
7. Documentation to verify additional income, such as child support, pension, etc.
8. Account numbers of all your credit cards and the amounts of any outstanding balances.
9. Lender, loan number, and amount owed on other installment loans—student loans, car loans, etc.
10. Addresses where you lived for the last five to seven years, with names of landlords, if appropriate.
Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2004.
All rights reserved.
