Home Mortgages What To Know When You Buy A Home In New Jersey
Posted Oct 12, 2007 @ 2:10 pm, Viewed by 397 Visitors, Read 423 Times..jpg)
Here are the mortgage options you should know about:
Conventional Mortgage
A conventional mortgage is a loan to purchase property made between a lending institution and a borrower without a third-party participant, such as the FHA or VA. Most types of conventional loans are paid off over 15, 25, or 30 years.
Terms of a conventional loan vary among lenders, but basically a loan can be obtained even without a down payment. When the down payment is less than 20%, it is often necessary for the loan to have private mortgage insurance (PMI) to protect the lender. Private mortgage insurance (PMI) is insurance written by a private company that protects the lender from losses in the event the borrower defaults on the mortgage. Borrowers are required to pay the premium for private mortgage insurance. Private mortgage insurance limits a lender's exposure to financial loss resulting from loan default.
In addition, conventional mortgages can have a fixed rate or adjustable rate.
Fixed-Rate Mortgages Fixed-rate mortgages give you the security of knowing your monthly principal and interest payment will not change over the life of the loan. This type of conventional mortgage also protects you from rising interest rates. No matter how high market interest rates go, your mortgage rate remains the same. Prosperity Mortgage offers a variety of fixed-rate products, with loan terms ranging from 10 to 30 years. Fixed-rate mortgages are best for people who:
Prefer regular payments with no surprises
Are on limited or fixed incomes
Plan to stay in their homes a long time
Are buying a home at a time when interest rates are comparatively low.
- Buy a more expensive home. Because your maximum loan amount is based on the initial monthly payments, you may be able to borrow more.
- Manage your cash flow in a high-rate environment. If you are buying a home at a time when interest rates are comparatively high, an ARM can help you avoid making high monthly payments right away.
- Plan for future income growth. An ARM can help you keep your payments low while your income increases during the loan's fixed period.
- Potentially improve your credit standing. The lower initial rate can make your payments easier to manage, helping you improve your credit and expand your financing opportunities if you make timely payments on your mortgage loan and other credit obligations.
- Save money if you expect to move or refinance. If you plan to move or refinance before the end of the loan's initial fixed period, you can take advantage of an (ARM's) lower payments without worrying about future rate increases.
After the initial fixed-rate period, the remainder of the loan term is divided into adjustment periods of one year or six months, depending on the ARM product you choose. At the end of each adjustment period, the interest rate may change based on prevailing market conditions.
FHA Loan
With an FHA loan, the Federal Housing Authority insures federally qualified lenders against any default payments by the borrower. While the down payment can be as low as 2.25% of the purchase price, the FHA charges the borrower an up-front mortgage insurance premium (MIP) fee. The lender may also charge prepaid interest, called points.
Balloon Mortgage
A balloon mortgage is a loan that offers a low interest rate for a set period of time, typically 5, 7, or 10 years. At the end of that time period, the balance is due in full to the lender or refinanced by the borrower.
Ready to buy? Start Shopping online at Morris County Real Estate or Union County Real Estate , See all the homes listed for sale in Morris County and Union County New Jersey.
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James Boyer, is a resident of Morris Township in Morris County New Jersey and Specializes in listing and selling homes in Morristown, Morris Township, Madison, Florham Park, Chatham, Summit, Short Hills, Millburn, Maplewood, & South Orange New Jersey and Morris Essex & Union County Real Estate. Read More
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