Mortgage Brokers Butte MT
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Mortgages - Overview
For the potential homeowner who is looking for a mortgage, there are a great many possibilities that cover not only all financial situations but all credit issues as well. First time homebuyers programs exist for the middle-income buyer who has not owned a home in the last three years and doesn't have much money for a down payment. Government-backed mortgages for those who don't have money to put down and qualify under those programs are also plentiful. There are mortgages that are even accessible to those individuals with less than stellar credit: the trick is in locating such opportunities.
Mortgage rates vary contingent upon the type of mortgage, credit of the borrower, amount of the down payment, age of the property, and other varying factors. In addition to interest rate, other items that add to the cost of a mortgage include taxes and insurance and sometimes a lender may require private mortgage insurance (PMI) if the ratio of the mortgage loan to appraised value is higher than the amount the lender allows, usually 80% or less for a conventional, or non-government guaranteed mortgage. Individuals with less than stellar credit may find that mortgages come with a slightly higher interest rate attached to them: the interest rate is congruent with the risks the lender must take in order to supply the consumer with the loan.
Mortgages can also vary in the prepayment term and can sometimes be directly connected to the interest rate. For example, the mortgage company may offer a 15-year variable rate mortgage at 6.25% but a 20-year variable rate mortgage at 6.50%. Fixed rate mortgages tend to have a higher rate than variable rate because the lender has an option to raise the rate annually, however, these are very dangerous for those who work in an industry where raises are not guaranteed (companies who frequently have hiring freezes, for example) or those who are on a fixed income because they are based on the premise that your income will rise every year, and in some cases, even if you receive a raise, it will not match the increase in your mortgage payments.
Conventional mortgages are just one type of mortgage available to consumers. This is the most well known mortgage and the type that most lenders prefer. With a conventional mortgage, the buyer is required to pay minimum of 20-25% down based upon the appraised price. If the buyer is fortunate enough to find a seller who is willing to take less than the appraised price, that means the buyer does not have to put as much down since the amount the bank will finance is the ratio of loan amount to appraised value and not loan amount to sales price. Of course, that can go in reverse as well if you have a seller who is trying to sell his home for higher than the appraised value and has a buyer who is willing pay more than the home is worth.
Home sellers also prefer conventional mortgages for a number of reasons, the most important one being that there are no points involved. With a government-guaranteed mortgage such as FHA or VA, the banks and mortgage companies charge a fee to compensate for the fact that they must charge a lower interest rate than is customary. The seller customarily pays this fee, but sometimes a buyer and seller agree to share this cost in order for the seller to agree to accept the government financing.
Another reason sellers prefer conventional financing is there is less time from loan application to loan approval. If a buyer has a strong credit and work history, a conventional mortgage loan may be able to close within 30-45 compared to 60-90 days for government loans. If the seller and buyer are looking to move soon due to the sale of current residence or termination of a lease, this makes it quite convenient and less costly for both.
VA mortgages are reserved for those who have served in the military or are currently in the military in active or reserve status. What makes it attractive to buyers is that there is no down payment requirement, the interest rate is lower than conventional mortgages, and the seller pays all points. On the other hand, sometimes the fact that the seller has to pay the points discourages some sellers from being willing to accept buyers who plan to apply for a VA guaranteed mortgage.
On the other hand, sellers who limit themselves to only conventional mortgages limit their potential to sell their property in a timely fashion unless they live in a high-priced area where everyone is moving from another home rather than first time homebuyers. In most cases, VA loans are easier to obtain not only because of the fact that there is no down payment but because the income qualifications are lower. In addition, the settlement costs tend to be lower because the points are paid by the seller, leaving the buyer's cash outlay freer to pay for other costs that are associated with the mortgage.
For the veteran who is interested in home ownership, the VA mortgage is the best way to go. In addition, if you run into problems throughout the course of the mortgage, you can depend on the Veteran's Administration to intercede with the mortgage company on your behalf. When it comes to mortgages, if complications should arise, it's certainly nice to have specific agencies working for you toward a promising resolution. Your benefits do not run out, however, you must pay off one mortgage before you can use your benefits again. In the case of a takeover, the buyer will need to apply for his own certificate of eligibility for you to be able to use yours again.