Mortgage Tip: Financing or refinancing a home.

Finding your dream home can be exciting. But finding the best mortgage that fits your needs or budget? Well, that’s a different story.In fact, it happens to be one of the most stressful events in one’s life. The mortgage world can be a very confusing experience.Each mortgage has variables that determine how much a borrower ends up paying, along with technical verbiage that can make it difficult,
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or even frightening, to understand what he/she is getting into. Most borrowers simply want the best deal on a loan. Making apples-to-apples comparisons can be challenging. But having a little education can go a long way in helping you find the right mortgage for your situation.

How much can I afford?  Before you start looking for a new house or dive into mortgage calculations and applications, ask yourself two important questions: How long do I plan to stay in this house? How much money can I put down on the purchase of this house?

Your answers to these questions can help you determine the best mortgage for your short-term financial situation and long-term outlook. Understanding the advantages of each type of mortgage can help you decide which one makes sense for your situation.

Fixed Rate or Adjustable Rate Mortgage (ARM)? According to Realtor.org, the national average of Americans owning their homes between 2001-2009 was 6 years. That average has increased a little since the real-estate collapse of 2011.

What does the average time owning a home for the buyer mean? Buyers who do not plan to stay in their homes very long and who are looking for lower borrowing costs should consider an ARM. Borrowers, who plan to remain in their homes for a longer period of time, generally more than 7 years, may consider the traditional fixed-rate mortgage. More often, an ARM may just be a better mortgage than any fixed-rate mortgage you would consider given many factors.

PMI, what is it?  Private Mortgage Insurance, or PMI, is insurance payable to a lender that may be required when taking out a mortgage loan.  Lenders typically require PMI for loan with an outstanding balance that is 80 percent or more of the homes current market value for conventional loan, or fixed-rate mortgages. This is a cost that does not go towards the principle or interest payment of your loan. So, if you want to avoid this cost while putting less money down on the purchase price of your home, you may want to consider the credit union’s ARM. For example, PMI is not required if you have an outstanding balance that is 90 percent or more of the homes current value for the credit union’s 2-year ARM.

There are many other factors that may steer you to one mortgage or loan over another. That’s why it’s important to take the following steps when looking at financing your home:

1. Meet with one of our loan officers to discuss your financing needs, determine the appropriate mortgage type for your situation, and initiate the application process. 

2. Together you and your loan officer will complete your application and collect or complete all required documentation. 

3. Your loan officer will help you choose the best mortgage that fits your needs by using the information collected.

4. The final step in the process is closing. Your mortgage information will be prepared in a settlement statement, which will identify all expenses and fees for which you can expect to pay at closing.

If you are looking for that new home or wanting to lower your existing mortgage payment, don’t hesitate to contact your credit union. For more information on our mortgage options click here.

Contributors


Paul Hughes
President


Matt Tebbetts
VP of Marketing/Communications

Brian Sponaugle
Chief Operations Officer

Kaitlin Grooms
Branch Services Manager