Now that you know what you can afford and you've found a home that fits within the budgetary guidelines, it's time to choose the right loan. Before making the big decision, ask yourself how long you plan to own your new house, whether you are using equity from a previous residence for the down payment or if this is a vacation home.
A fixed rate mortgage is one whose rate does not change throughout the life of the loan. The payoff is usually within 15 to 30 years. If interest rates rise, your payments remain stable, hence minimizing your financial risk. The only increase in payment would come from higher taxes or insurance. If you plan to remain in your new home for some period of time and want the comfort of a fixed budget, this might be the best choice for you.
An adjustable rate mortgage (ARM) is one that offers a lower rate at the beginning, followed by adjustments at fixed intervals. For example, you may have a fixed low rate for five or seven years and annual adjustments thereafter. This type of loan often works well if you plan to own the property for a short period of time. The lower payments allow you to purchase a larger home, but you do incur the risk of increasing interest rates and, of course, higher payments.
In today's lending market, there are a number of products that can be customized to suit home buyers. It's best to sit down with the professionals and explore all the options. Making yourself aware of these options along with their calculated risks will increase your ability to enjoy the home of your dreams.
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And here is something important to know. Lenders have really “tightened their belts” on lending practices. It’s not so easy to get a loan nowadays. In some instances, it’s almost impossible. The pendulum has swung from one end to the other. Whereas it was easy to qualify for a loan five years ago, today you must have excellent credit, and you must show you have enough on-going income to pay the loan back.
In any event, the very first thing you must do BEFORE you start searching for a property, is make sure you can obtain a loan, and make sure you figure in your taxes, insurance and homeowners fees if that applies. Most sellers will not even look at offers when the buyer has not provided documentation ahead of time.
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I sell many homes in this beautiful Palm Springs California desert area, and it surprises me that there are still buyers out there who have not done their homework ahead of time. In some cases the home of their dreams gets purchased from another buyer who has been pre-approved ahead and time. You don’t want this to happen to you!
IMPORTANT: If you or someone you know is interested in buying or selling a home in the Palm Desert Area, try searching properties on the same Desert Area MLS Realtor’s use, or give me a call….or visit my website at Palm Springs Homes and Estates. I will be happy to give you or your referral my “red carpet service.” After the sale, I will send you a $50 Gift Certificate towards dinner in a fabulous Palm Springs Area Restaurant so you can celebrate!
Brought to You By Your Favorite Realtor,
Nancy Hankin
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