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Disclaimer: The data relating
to real estate for sale on this web site comes in part from the Internet Data
Exchange program of the RANW MLS. Real Estate listings held by brokerage firms
other than H. Strobl Realty, Inc. include the name of the listing broker. Only
listings of Brokers participating in IDX are included. 2002 REALTORS®
Association of Northeast Wisconsin Multiple Listing Service. All Rights
Reserved.
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Although you may hear about many different types of mortgage loans, they all
belong to two families: Conventional and
Government . These loans are available through various
mortgage lenders.
The major advantage of fixed rate mortgages is that you know what your
housing costs are for the life of the loan. Some fixed-rate mortgages you will
probably hear about are:
- 30-year fixed-rate mortgage
This is the easiest fixed-rate loan to qualify for. It keeps your monthly
mortgage payments low by making your payments over a longer period of time.
However, the longer the term of the loan, the more total interest you will
pay. This mortgage loan may be ideal if you plan to remain in your home for
years and wish to keep your housing expense low. This loan also provides
maximum interest deduction for tax purposes.
- 15-year fixed-rate mortgage
The 15-year mortgage offers a lower interest rate than a 30-year mortgage.
This type of shorter-term mortgage will save you a significant amount of
interest over the life of the loan. By paying off the mortgage more quickly,
you also build up equity in your home soon. However, the monthly payments you
make will cost you more than those on a 30-year mortgage.
With an adjustable-rate mortgage (ARM), the interest rate you pay is adjusted
from time to time to keep it in line with changing market rates. This means that
when interest rates go up, your monthly mortgage payments may go up, too. On the
other hand, when interest rates go down, your monthly mortgage payments may also
go down.
ARMS are attractive because they may initially offer a lower interest rate
than fixed-rate mortgages. Since the monthly payments on an ARM start out lower
than those of a fixed-rate mortgage, you can qualify for a larger loan. You may
want to consider an ARM if you are confident your income will be enough to
comfortably handle any increase in payments, if you plan to move in a few years,
or if you need a lower initial rate to afford to buy the home that you want.
Before applying for an ARM, find out how high your monthly payments could go
– the "worst-case scenario." An ARM has two caps on how large an interest rate
increase is permitted.
One cap sets the most that your interest rate can go up during each
adjustment period. For example, your ARM may cap the yearly interest rate
increases at 2 percent, meaning that the adjusted interest rate can never be
more than 2 percent higher than the previous year.
The other cap sets the maximum total amount of all interest adjustments over
the life of the loan. For example, your ARM may have a lifetime rate cap of 6
percent, meaning that the highest adjusted interest rate you can ever be
required to pay is no more than 6 percent above the original rate.
Finally, one important thing to know when comparing ARMs is that the interest
rate changes on an ARM are tied to a financial index. A financial index is a
published number or percentage. Lenders use this index to measure the difference
between what they are making on their investment in the mortgage and what they
could be making on other types of investments. The most popular financial index
is based on the rate of return on a one-year a Treasury bill (T-bill).
Timing the sale of your current home with the buying of a new one may
not always work as planned, based on the unpredictability of the housing
market. But, if you consider financial options available to you, the
transition from home seller to home buyer can be easier than you think.
Market Conditions
If you have flexibility to choose, whether it's best for you to buy or
sell first will probably be most influenced by current market conditions
and your financial situation.
You may want to consider the following and discuss these as needed with
your real estate agent:
- Approximately how long might it take to sell your current home?
- Are homes like yours selling quickly?
- Are there many homes like yours already on the market?
- Approximately how long might it take you to find a home to buy?
- Are there a lot of homes on the market to choose from, or are
listings scarce?
If your local market currently favors sellers, you'll have a better
chance of selling your home quickly than if it's a buyer's market.
Therefore, the risk of buying a home before you sell may be lessened.
However, if it's a buyer's market, then it may take your home longer to
sell, which would mean a greater risk of getting trapped with two house
payments if you buy a home first.
Financial Situation
If you don't have sufficient savings to cover costs associated with
buying a home before selling your existing one, you may want to
concentrate on selling your home first. However, if you do have
sufficient savings, you might qualify for financing without selling your
existing home first.
In either case, before making your decision, you may want to consider a
bridge loan. A bridge loan would be secured by the equity in your
current home and may provide you with enough funds to close on a new
home before your current one sells. With a bridge loan, your current
mortgage won't keep you from buying a new home.
Bridge loans offer:
- Convenience: you don't have to wait until your
current house is sold to obtain financing for your new home
- More home: the mortgage payments on the listed
property are not used to qualify you for your new loan
- More time: take up to six months to sell your
existing property. Interest is due at the end of the term.
Still have questions about how a bridge loan might help you buy your
next home? Don't delay, you may be able to buy that new home sooner than
you thought! Contact a Mortgage consultant to help you to explore your
financing options and suggest a customized loan program that can help
you buy your next home now.
Government Loans
To obtain these loans, you apply through a lender that is approved to handle
them.
- FHA Loans
With a FHA loan, you can purchase a home with very low down payments (from 3
to 5 percent of the FHA appraisal value or the purchase price, whichever is
lower). FHA mortgages have a maximum loan limit that varies depending on the
average cost of housing in a given county. They are available in both
fixed-rate or adjustable-rate mortgage plans
- VA Loans
The federal VA guarantee allows qualified veterans to buy a house costing up
to $203,000 with no down payment. State VA loans are available to veterans of
Wisconsin. Qualifications vary depending on the time enlisted in the armed
forces and the availability of funds. You must check with either the state of
Wisconsin Department of Veterans Affairs or a participating lender to
determine your status.
- Rural Development
Rural development loans offer home loans with no down payment requirements to
low- and moderate-income persons who live in rural areas or small towns.
- WHEDA Loans
WHEDA’s HOME program features low down payments and below-market interest
rates. And with HOME, your rate is fixed for the term of your loan – from 15
to 30 years. You must meet certain requirements in order to be eligible for a
HOME loan.
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