Tag: Fixed Rate Loans

Different Loan Categories for Buyers of Weatherford Homes for Sale

March 21, 2019 Off

Before you start shopping for a home in Weatherford real estate, it would be wise if you first look for a loan and get pre-approved. This way, sellers are more likely to accept your offer.

Generally, the available loans that buyers can avail are categorized into three: government or private, adjustable or fixed rate, and new loan or assumable.

1. Government or Private Loans

The money from government mortgage loans like FHA and VA loans are not actually lent by the government but instead, insures or guarantees to repay lenders in case of defaults. These loans have advantages — they call for a lower deposit than other loans and usually have lower points or interest rates. The disadvantages: they have a certain limit on how much can be borrowed, the process is longer, and the closing costs are sometimes higher.

Most loans are made by private institutions like mortgage companies, banks, and savings institutions. Lenders generally require borrowers to get mortgage insurance, especially if the down payment made is low. This is because such insurance gives the lender a certain degree of protection if ever the borrower defaults. The insurance may possibly be added to the amount of loan or financed at closing.

2. Adjustable or Fixed Rate Loans

Adjustable rate mortgages, also called ARMs, have monthly payments or interest rates that change over time; it may ascend or descend. Typically, these mortgage loans begin with lower monthly payments, interest rates, points and fees compared to a fixed rate. For this reason, ARMs often appeal to first time buyers and young couples who are expecting that their incomes would grow, and also to those people who do not have that much cash to pay for deposit and closing expenses.

If you choose this type of loan, be sure to ask the lender to have the terms completely explained to you. You should ask about the index that will be utilized to compute the interest rates in the future, how the index charges would influence your loan, and the interest rate cap or the maximum limit on the amount of interest rates that will be charged to you no matter how high it goes in the marketplace.

On the other hand, on fixed rate mortgages, as the name implies, the interest rate do not change during the life of the mortgage loan, which can be from 10 years to 50 years. This means your payment will stay the same, with the exception of changes on the insurance and taxes.

3. New or Assumable Loans

You may also choose between a new loan or an assumable one during the process of buying a property from the available Weatherford homes for sale. This means you may get a new loan or assume a loan that already exists, which are often on the same terms and conditions as the last owner. Some examples of assumable loans are FHA loans, VA loans, and other adjustable rate loans.

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