Saturday, November 2, 2013

The 'How-To' of Home Financing

Negotiate lower interestLength of Loan, Interest Rate, and PointsThe longer the term and the higher the down payment, the lower your monthly payments will be. On the other side, the higher the term the high rate of interest you pay.· Here the rate of interest is very important because when the rate of interest is high, your monthly payment will also high.· Points are an amount of prepaid interest paid by the borrower to the lender at closing. A point is equal to 1 percent of the loan amount.Adjustable or Fixed:Mortgage loans have interest rates that will stay fixed for the life of the loan, that may change or represent a combination of fixed and variable rates. Most people use a fixed-rate mortgage. The benefit of that is , you always know exactly how much your mortgage payment will be, and you can plan for it. But fixed-rate will not be the good ever for you.With an Adjustable Rate Mortgage (ARM), your interest rate and monthly payments usually start lower than a fixed rate mortgage. But your rate and payment can change either up or down, as often as once or twice a year.Freddie Mac, Fannie Mae, and Ginnie MaeFreddie Mac and Fannie Mae have the same charters, Congressional mandates, and regulatory structure. The two companies, however, have different business strategies. Competition between the two ensures that the ultimate beneficiary is the consumer in the form of lower housing costs.Both Freddie Mac and Fannie May are a stockholder-owned corporations. The former was chartered by Congress in 1970, the latter in 1968. Both were designed to create a continuous flow of money to mortgage lenders in support of home ownership and rental housing. They do so by purchasing mortgages from primary lenders-- banks, savings and loans, etc. with whom the consumer primarily does mortgage business.