Selecting the Right Massachusetts Home Loan

When real estate investing, or buying your primary residence, it is important to know what is the best Massachusetts home loan program in relation to the market direction and your financial objectives. All of these are factors in selecting the right home loan. This is why we believe it is a disservice to you to just quote rates. Without knowing the complete picture you may end up like 83% of American home owners... with the most expensive home loan on the market!

The recent quarterly percentage point interest rate increases by the Federal Reserve could mean huge savings if you consolidate your home equity loans with your mortgage payment now, while long term rates are still at record lows. At the most recent FOMC meetings, these rates are expected to increase further. However, a cut in the Fed Funds rate is detrimental to your mortgage interest rate. Additionally, economists fear the turnaround in the economy could negatively affect the bond market... which in turn could signal interest rates to rise again.

The financial markets are dynamic and quite volatile. Technical and fundamental analysis are critical to understanding how to structure your loan and when to initiate your application.

Call 401-293-0631 or contact us via email today for a free consultation on how to get the right mortgage for you!

Choosing a Mortgage

How to buy a house? Choosing among the many houses that may be available is hard enough -- then you need to make a choice from the myriad of mortgages that are offered in today's market. Is it a good time for real estate investing? How to buy house that fits your needs and the needs of your family? Selecting the right home loan can be difficult. Take heart, although there are literally hundreds of different mortgages available, they all fall into only a few basic varieties. Some may fit perfectly into your situation, others may be unwise or unattainable. By narrowing your choices, the process of picking the right mortgage becomes much easier.

Fixed Rate or Adjustable (more on ARMs -- More on Fixed Rate Loans)

Terms: 15, 20 or 30 years

You will probably want to aim for the shortest mortgage term that is comfortable (and for which you will qualify). The interest savings are enormous as the term decreases. Always make a comparison between a 15 year term payment and a 30 year term payment. The difference is often surprisingly smaller than anticipated. The savings over the term of the loan, however, can be significant. For example, comparing a 15 year term to a 30 year term, $ 100,000 mortgage at an 8 1/2% fixed rate yields the following results.

HINT: If you can't qualify for a shorter term try to add at least the amount of 1 additional payment per year -- this will knock nearly 10 years off a 30 year loan.

One of your first decisions should be between a fixed rate (the interest rate remains constant through the life of the mortgage) or an adjustable rate mortgage (the interest rate is adjusted -- either up or down -- at specified times during the mortgage term). Adjustable Rate Mortgages (Arms) will have an initial interest rate lower than fixed rates but will adjust upward (unless rates really fall!) usually after the first year. They may be a good choice if you are sure that you will not be owning the home for an extended period (more than 5-7 years) of time.

Points or No Points

When selecting a home loan, a large component of your mortgage decision has to do with one of the first charges associated with your loan even before you make your first payment. The "points" attached to the mortgage: A point is 1% of the loan amount, paid to the lender or the mortgage broker at closing (in cash). For more information on paying (or not paying) points, see the article "Should I Pay Points?" written by Randy Johnson, author of the best-selling book on mortgages How to Save Thousands of Dollars on Your Home Mortgage.

Mortgage Comparisons

Once you have a general idea of the type of mortgage that best suits your situation, the next step is to begin to make comparisons among the lenders that are available. Weekend newspapers will often have the rates of individual local lenders posted in their Real Estate section. To get the specifics of each lender's rate and term, you can contact the bank or mortgage company directly. Another source is a mortgage broker in your area, who will often represent a number of sources of mortgage funds and can assist you in your choice.

Credit Problems

There are options for those who have had credit problems and still want to own a home. See the section devoted to that topic.

You can print out a copy of a mortgage comparison chart to keep track of what is available for you here.

Apply for a Massachusetts home loan online, or download a printable version

Common Loan Types: Conventional, FHA, VA and "No-Document"

Conventional: A "traditional" mortgage, not directly insured by the Federal Government. Most conventional loans under $ 275,000 are administered through Fannie Mae or Freddie Mac (private corporations but regulated by the government). Those loans over that amount are designated "jumbo loans" and are funded by the private investment market.

FHA: Insured by (but not funded by) the Federal Housing Administration (FHA) a division of the U.S. Department of Housing and Urban Development (HUD), and designed for, in general, low- and middle-income borrowers and many first-time buyers. There are, however, limits (which vary from county to county) to the maximum loan amount. On January 1, 2000 HUD began insuring home mortgage loans of up to $ 121,296 in communities where housing costs are relatively low, and loans ranging up to $ 219,849 in communities where housing costs are relatively high. FHA loans have somewhat more relaxed qualifying standards and ratios than conventional loans and have the availability of both 15 and 30 year fixed as well as 1 year adjustable mortgages.

VA: For those qualified by military service, the Veterans Administration (VA) insures (but does not fund) 15 and 30 year fixed as well as 1 year adjustable mortgages with lower down payment requirements (as low as 0 down) and somewhat more lenient qualifying ratios.

No-Document ("No-doc) Loans: No-doc mortgages are generally a wise choice for self-employed people, those who do not wish to verify their income, and those with a brief or blemished credit history, or no credit. The benefits of a no-doc mortgage include a shorter application process since you are not required to provide income, employment or asset documentation, as well as a streamlined approval process because there is little subsequent verification. However, no doc mortgages generally will be at slightly higher interest rates and are offered by fewer lenders.

How to Buy A House, Selecting the Right Home Loan, and Real Estate Investing Tips courtesy Focus Professionals, Inc.

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