Experts say that mortgage rates are at historic lows and now is the time to buy or refinance… but with so many options out there, how do you even begin to figure out the best home or farm loan for you? As with any big decision, it’s important to get all the facts from the best possible sources.
What are my options?
There are several different kinds of loans, and each one serves a different purpose. Your Loan Officer can help you decide which loan is best for you.
The main benefit of a Fixed Rate Mortgage is that the rate and payment stay the same for the life of the loan. The fixed rate makes it easy to create your household budget – the mortgage payment will be the same every month. You can even pick the term; many local banks offer 10, 15, 20, or 30 year terms.
Adjustable Rate Mortgage (ARM) Loans typically offer a lower payment and interest rate at the start of the loan. The rate may be fixed for 1 to 10 years; the rate may adjust annually thereafter based on market conditions.
If you want to build the home of your dreams, a Construction-To-Permanent Loan may be a good solution. You pay closing costs once, and both the construction loan and permanent loan have the same interest rate.
Home Equity Loans allow you to borrow a portion of a home’s equity – the difference between the current market value of the home and how much is owed – and use the funds to purchase a new car, pay for home improvements or vacations and much more.
How much can I afford?
Get pre-approved for a mortgage before you make an offer on a home or property. A pre-approval letter tells the seller that you are ready and able to buy. It also helps you know how much the bank says you can afford.
The annual percentage rate is just one thing to consider when looking at a loan. You also need to review closing costs, origination fees and underwriting fees. Your mortgage broker or bank is required to provide a written Good Faith Estimate to you within three days of your application; this details the costs you will have to pay at closing.
What does that even mean?
A lot of unfamiliar terms get tossed around when you’re trying to buy a home. Terms like “appraisal fee," “amortization," and “escrow," just to name a few.
An "appraisal fee” pays for a professional to estimate the current value of your home; “amortization” is the loan repayment schedule that details monthly payments of principal and interest; and “escrow” refers to funds paid to the lender each month for the payment of real estate taxes and insurance.
Visit www.ozarksfn.com for a link to First Federal's website listing more terms & explanations of mortgages.
Debbie S. George-Jones is the Public Communications Officer at First Federal Bank in Harrison, Ark.
