Consumers have several options when financing a new home. Which mortgage is right for you depends on your personal and financial circumstances. To make the decision-making process easier, CreditGUARD of America provides a list of basic mortgages available for financing a new home:
Fixed-Rate Mortgage
Fixed-rate mortgage is the most popular type of mortgage for new home buyers. With a fixed-rate mortgage, the mortgage interest rate will stay the same for the life of the loan. Most lenders offer the convenience of 15, 20 or 30 year terms to pay off the mortgage. Even though the payment is slightly higher on a fixed-rate mortgage, it is a favorite among homeowners because the there is no risk of the payment increasing with interest rates increase.
Adjustable-Rate Mortgage
Unlike a fixed-rate mortgage, adjustable-rate mortgage will offer a much lower payment, but the interest will fluctuate with the current market rates. Be careful - when you agree to an adjustable-rate mortgage, if the market rates increase, so will your interest rate and monthly payment!
Nontraditional Mortgages
Nontraditional mortgages are designed for consumers with poor or no credit. These mortgages usually have higher interest rates. The better your credit score, the lower your interest rate. If you apply for a loan and do not like the interest rate being offered, you may want to consider improving your credit before financing a new home.
Special Financing Mortgages
Special financing mortgages are for home buyers with special needs. To qualify for a special financing mortgage, the consumer must have low to moderate income as well as special circumstances that would qualify them for the specific mortgage. Contact your lender for more details on special financing mortgages.
Additional Lending Sources
There are additional lending sources that you may be eligible for, depending on your circumstances. Some employers offer Employer Assisted Housing (EAH) program that can be used towards your down payment or closing costs. Federal Housing Administration (FHA) offers loan programs for first time homeowners as well as other types of lending assistance. US Department of Veterans Affairs (VA) offers lending assistance to qualified veterans. Rural Housing Services (RHS) provides financing to qualified homeowners for buying a home in a rural area. Check with the specific agency to get more details on their lending assistance programs.
When you refinance a home, you are essentially paying off your existing mortgage and taking out a new mortgage. Why do homeowners refinance their homes? Home refinancing offers homeowners a variety of benefits including:
- Lower Monthly Payments
- Lower Interest Rates (i.e. After improving credit rating, the consumer is qualified for a lower rate.)
- Change the Loan Type (i.e. Move from Adjustable-Rate Mortgage to Fixed-Rate Mortgage.)
- Cash Out Additional Monies to use for Home Improvement or Pay Off Existing Debts
When applying for home refinancing, the lender will examine your current income, credit report, mortgage payment history, existing unsecured debts, the value of your home, and other financial assets.
Consumers may choose to apply for a second mortgage instead of refinancing their home. This mortgage is taken in addition to the existing mortgage and is based on the equity in the home. Most consumers get second mortgages to pay for home improvement projects, college tuition or for financial emergencies.
How much can you borrow with a second mortgage? Your loan amount depends on how much your home is worth minus how much you currently owe on the first mortgage. If your home is worth $250,000 and your current mortgage balance is $100,000, then you can borrow up to $150,000 for the second mortgage.
Because your home is collateral for the second mortgage, be cautious about obtaining a second mortgage. Be certain you’ll be able to afford both (1st and 2nd) mortgage payments. Because second mortgage rates tend to be higher than refinancing your home, you may want to consider both options before making a decision.
Contact us online or call CreditGUARD of America at 1-800-500-6489. Our certified credit counselors can review your current financial situation and advise you on your home financing options. Certified credit counselors are available Monday through Thursday 8:00 a.m. to 12:00 midnight; Friday 8:00 a.m. to 11:30 p.m.; Saturday 10:00 a.m. to 6:00 p.m. Eastern Time. For online service, 24/7, use the Credit Card Debt Analyzer to calculate your estimated interest and payment savings available, through our debt management program.
Contact Us | Credit Counseling | Debt Analyzer | Questions & Answers
Educational Resources | Credit Management | Debt Collection | Money Management
Free Calculators | About Us | Community Services | Corporate Services | Associations
Testimonials | Media Center | Privacy Statement | Account Login | Site Map
counselor@creditguard.org
CreditGUARD of America • 5300 Broken Sound Blvd NW • Suite 100 • Boca Raton, Florida 33487
Copyright © 2007 CreditGUARD of America, Inc. All rights reserved.
| Privacy Statement |
Click our savings calculator.
