Choose a Fixed Rate or ARM When Refinancing

One of the most important decisions a homeowner will have to make when deciding to refinance their home is whether they want to refinance to a fixed rate mortgage, or to an adjustable rate mortgage (ARM) or a hybrid loan which is a fixed rate for three to ten years then converts to an adjustable rate after three to ten years. The names are pretty much self explanatory but basically a fixed rate mortgage is a mortgage where the interest rate remains constant and an ARM is a mortgage where the interest rate varies. The amount the interest rate varies is usually tied to an index such as the Libor, 12 month MTA or Treasury index. Additionally there is a clause defined in the promissory note of an ARM which prevents the interest rate from rising or dropping dramatically during a specific period of time. This safety clause provides protection for both the homeowner and the lender.

Advantages of a Fixed Option
The option to refinance to a fixed rate is ideal for homeowners who want to keep their payment stable. Homeowners who refinance into a fixed rate mortgage from a variable rate do not have to be concerned about how their payments may vary during the course of the loan term.

Disadvantages of a Fixed Option
Although the ability to lock in a favorable interest rate is an advantage it can also be a disadvantage. This is because homeowners who refinance to obtain an attractive fixed interest rate will not be able to take advantage of interest rates drops unless they refinance again in the future. If the homeowner chooses to refinance again, they will incur additional closing costs. On the other hand those additional closing costs are offset by appreciation in home value.

Advantages of an ARM Option
Refinancing to an ARM is favorable in situations where interest rates are expected to drop in the near future. A homeowner who can predict the future would be able to determine whether or not an ARM is the best refinancing option. However, since this is not always possible homeowners have to either rely on their instincts and hope for the best or select a more stable option such as the fixed rate mortgage.

Disadvantages of an ARM Option
The most obvious disadvantage to refinancing into an ARM is that the interest rate may rise significantly due to unforeseen circumstances. In these situations the homeowner may suddenly find themselves paying significantly more each month because their adjustable rate index has risen. Although it is a disadvantage, the clause in the promissory note prevents the interest rate from being raised or lowered by a maximum percentage over a certain period of time.

Consider Refinancing to a Hybrid Loan
Homeowners who are undecided and find certain aspects of fixed rate mortgages as well as certain aspects of ARMs to be attractive might consider the hybrid loan. A hybrid loans is one which combines both fixed interest rates and adjustable interest rates. This is normally done by offering a fixed interest rate for an introductory period, usually three to ten years, and then converting the mortgage to an ARM for the remaining loan term. In this option, lenders typically offer interest rates which are extremely attractive to encourage homeowners to choose this option. Now that you have the knowledge you can make a wise refinance decision.

Visit the following sites for more information on Refinancing to Fixed Rate or to Refinance Jumbo Loan

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Finding The Correct Mortgage

Finding the correct mortgage can be a time consuming and strenuous process, yet it is one of the most necessary and financially important steps in purchasing a home. In order to shop confidently for a mortgage you should first educate yourself on what is available in terms on loans. The most common type of home loans are the fixed or adjustable rate loans. However the fixed rate mortgage is the most attractive of these options as the fixed interest rate keeps your payments the same for the term of the loan. These are by far the most desirable loan as many of the other mortgage options have unconventional terms and fluctuating interest rates that increase the chances of foreclosure.

High risk loans are good for those who have bad credit, unusual employments situations or those who cannot come up with a large down payment (usually a minimum of 20%.) Some examples of this kind of loan are balloon payment, interest only or 100% or more financing. It is a occurrence that is happening more often as homes become more expensive and people have to finance for greater than the home's asking price to cover closing costs and other home startup fees. Be careful when dealing with this kind of mortgage loan that you know exactly what you are getting into before you sign anything. Do your homework on the loan you are getting, know the terms, the payment schedule and any contingency clauses that may be included. Find out under what circumstances your payments can or will be increased or decreased and do the same with the info on your interest rates.

Another good idea is to find out about the company that you are borrowing from. What kind of track record do they have? Check with your local Chamber of Commerce and BBB to find out if there have been any complaints levied against this lender and if so, under what circumstances. It never hurts to know who you are dealing with and with such a large purchase it is entirely necessary.

Heath Hostetler is a certified Las Vegas Realtor:® who is known in the community for his honesty and hard work. Heath's knowledge of the Las Vegas real estate market is invaluable in the purchase or sale of a new home or condo.For more information contact Heath or visit him on the web at http://www.welcomehomenevada.com.

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Stated Income Mortgage Financing - Who Can Qualify?

Stated Income Mortgage loans fueled real estate sales over the last couple of years. It is said that these loan programs have also created the highest foreclosure rate in many years. Mortgage companies have increased credit scores for these programs drastically over the last few months. Do you qualify now? During the big real estate sales boom of 2004 through 2006, mortgage companies were getting more and more competitive by lowering the credit score requirements for stated income mortgage financing.

At one time, a home-buyer with a 580 credit score could secure one hundred percent financing to buy a home, without even proving his or her income! Well, as many people know the mortgage investors that were funding these easy to get approved type loans are either no longer in business or struggling to stay in business. Stated income mortgage programs were designed for home-buyers that were 1099 employees or self employed. Over the years, the requirements have changed greatly on these mortgage programs.

Now a W2 wage earner qualifies just as easily as a business owner, as long as they can reasonably state their income. When I say reasonably state their income, I don't mean a dishwasher at fast food joint stating that he makes $10,000 each month. Yes, that is unreasonable! The income stated must be in line with the national average for that particular profession or trade. Even sub prime lenders now also want to see a minimum of a 660 credit score to qualify for a 100 percent stated income mortgage financing program.

These programs are excellent for self employed or self made millionaires that have trouble documenting the income they make. Beware of mortgage brokers that ask you to state your income for far more than you actually earn each month. Over stating your income is a sure fire way to jeapordize your financial future. When looking into a stated income mortgage program, be sure to deal with only an experienced mortgage professional with a good reputation.

Glenn Keller is a veteran Florida mortgage broker and is associated with 1st Continental Mortgage in Saint Augustine, Florida. To learn more about buying a home with an FHA or VA mortgage, visit his website at http://www.bretlinfloridamortgage.com

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