The First Mortgage Company to Educate Buyers
Many people find themselves stuck for years with a mortgage whose terms and long term implications they didn't fully understand. It is a situation that the "first mortgage company to educate buyers*" is determined to change by educating buyers. The company sees a mortgage as a instrument to wealth and seeks to empower those who have one to make use of it as such.
One of the tools they may use to do this is an online questionnaire that makes you really think about one's long-term financial goals and how a home loan fits in the picture. There are questions such as how long you plan to live in the home you want to buy, whether you plan to increase principal reduction payments to the scheduled monthly payments and the goals you have with this first mortgage.
There are also questions that require one to rank their priorities. This include avoiding mortgage insurance, maximizing tax benefits and determining the maximum purchase price and loan that one can qualify for. Others are getting a particular monthly mortgage payment amount, including improvements in home financing and qualifying for new home before or without selling an existing home. It may also be that the goal is to be able to buy home within a given budget or to be able to sell, pay off, pay down or refinance a home while avoiding a pre-payment penalty. Other questions buyers are asked are their real estate goals in the short and long term.
Terms, options and processes
The "first mortgage company to educate buyers" also seeks to provide information on mortgage terms and the processes involved. Two terms are PMI and ARM. PMI stands for private mortgage insurance and it is given to protect lenders from losing their money in case they default on a loan or they are faced with foreclosure. It is a requirement when a mortgage is covering 80.01 percent or more of the cost of buying a home.
An ARM is an adjustable rate mortgage where the interest rate may change depending on market conditions. The loans however have rate caps that keep the rates rising or falling drastically. The loans are usually amortized over 30 years and they usually have the lowest monthly repayments.
The aspect of locking rates is another factor that many buyers don't know that the "first mortgage company to educate buyers" seeks to educate them on. The reality of the real estate market is that interest rates keep changing depending on factors like the Federal Reserve policy, inflation and the state of the economy. When indications are that rates will go up, then it is advisable to lock in a rate. Before deciding to do so, it is advisable to find out if it will be possible to close your loan within the lock in period. If not , then it will be of no benefit to lock in your rate.
If indications are that interest rates may drop before a loan has been processed, it would be advisable to do what is referred to as floating an interest rate rather than locking it in. This can be done at least five days before a home loan is closed.
Mortgage lenders typically offer buys three options of lock in programs. One is a hard lock which is essentially a guarantee that your home loan will close at a particular interest rate if you manage to lock the rate within the lock in period. Hard lock period are between 15 and 120 days but it is better to lock in as soon as possible because extended times come with higher discount points.
There is also the option of locking in while one is looking for a home to buy. This facility is for clients who have managed to secure pre-approval. It offers assurance that interest rates and monthly mortgage repayments will remain affordable when they are ready to make the purchase no matter what happens in the real estate market.
The third option is to lock in with a float in option. What this option means is that you will be entitled to better interest rates should market rates improve. This goes both ways in that should they go up, your rate will also be revised upwards. There is however a cap that controls the rate by which interest rates can be raised which is typically between 0.5 to 1 percent. A lower cap costs more discount points.
It is unfortunate but the sad reality is that the priority of some mortgage companies is to close a deal no matter what this implies for a client. One reason that so many faced foreclosure when recession hit is that they bit off more than they could chew and lenders were happy to lend them. AmeriFirst Home Mortgage is the first company to do things differently by putting the interests of our client first rather than just our own.
(creative commons photo credit)
*AmeriFirst Home Mortgage does not actually claim to be the "first mortgage company to educate buyers." We merely believe we're one of the few that concentrate on educating home buyers. And that makes us proud of our team.