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Reverse Mortgages

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It’s no surprise to anyone when we say that the aging process is a difficult thing to handle financially. There are a growing number of seniors planning to retire soon that are struggling to figure out how they will continue to pay their mortgage, maintain their standard of living, and pay medical bills, make home improvements, etc. for many reasons. For many seniors, their home is their largest and most lucrative cash asset- and could be the golden answer in helping to solve their financial worries post-retirement. Enter reverse mortgages. With the Federal Reserve keeping interest rates at an all-time low, reverse mortgages are presenting themselves to be extremely appealing for home-owners aged 62 and older that are looking to tap into their home equity. This is why on March 1st, 2016, Alpha Mortgage started offering North Carolinian’s and Virginian’s reverse mortgages within their scope of services.

So what is a Reverse Mortgage?

According to the HUD, “A reverse mortgage is a special type of home loan for homeowners 62-years or older that lets you convert a portion of the equity in your home into cash. Unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.” Borrowers are still responsible for property taxes, homeowner’s insurance, and property maintenance, but a reverse mortgage requires no monthly mortgage payments, and borrowers do not have to pay back their loan balance until they die, sell, or move.

Reverse mortgages are extremely complicated, but are great for seniors that are cash broke/ property rich, or cash rich/ property rich. The interest and fees on the reverse mortgage are added to your loan balance each month. Over time, your home equity will decrease as your loan balance grows. It’s the reverse of a traditional mortgage. The rising loan balance can eventually grow to exceed the value of the home, however, as the borrower (or the borrower’s estate) you do not have to repay any additional loan balance over the value of your home. Wade Pfau of The American College and McLean Asset Management, highlights what consumers need to know about repaying a reverse mortgage with tips such as “Prior to death, selling, or moiving, repayments can be made voluntarily at any point to help reduce future interest due and to allow for a larger line of credit to grow for subsequent use. There is no penalty for early repayment.” Read more of his tips here.

 Why would I get a reverse mortgage?

Reverse mortgages can be used strategically for many reasons. One of the biggest reasons that people take out a reverse mortgage is to stay in their current home without having to worry about their current mortgage payment.

Many people also open a line of credit with access to the cash over time to supplement social security, 401k, unexpected costs, or unexpected medical costs. People also use reverse mortgages to pay off existing mortgages, purchase a new home that better suits their needs with age, or as retirement income plans.

Sounds Great- Am I eligible?

To be eligible to receive a reverse mortgage, you must be at least 62 years of age or older, the property must be either 1-4 unit primary residences, condominiums, or manufactured homes that meet FHA’s requirements, homeowners must own the property as their primary residence and should have substantial equity in the home, borrowers must not owe any back debt to the government, borrowers are required to maintain the property in good condition to protect the value of the home, pay their taxes annually, and pay for their home owner’s insurance in accordance to HUD guidelines.

So there you have it! Reverse mortgages are great options for seniors who are interested in tapping into their home’s equity. As we mentioned earlier, reverse mortgages are excellent solutions for seniors, but can also be complicated, and aren’t for everyone. To educate yourself further about reverse mortgages, please visit our website devoted entirely to reverse mortgages here. If you’re ready to take out a reverse mortgage today, contact us, and let Alpha Mortgage ease in your retirement process.

NC Housing Loans – The Basics

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Owning a home is an integral part of the achieving American Dream. But where do you begin the process? This blog will teach you the basics of NC Housing Loans and what you need to do to prepare for your first home purchase.

Step 1: Start Early

The first thing that you need to do when you have decided to purchase a home is determine the negotaibles and non-negotiables involving where you will reside and start your research. What do you want in the house? Where do you want to live? Most importantly, what is your budget and can you afford a house? After you figure out the necessities your new home needs to make you happy, start your research.

Subscribe to newsletters, read magazines and newspapers with real estate listings, and research websites that have listings as well. Note how long homes that interest you stay on the market in the area you’re moving to, price, and size that you can afford in the area. Also be sure to watch changes in price over time.

 

Step  2: Get Preapproved

It’s always a good idea to get pre-approved for a mortgage if you can. You may have a basic idea on how much you believe you’ll be able to spend on a home, but until you get prequalified or approved for a mortgage, you won’t know for sure. To get preapproved, meet with your mortgage banker. They’ll tell you the price range of homes you should be looking at.

Step 3: Find your Dream Home

Once you get preapproved for a mortgage, you need to find your home. Find a real estate agent that you can trust, and who is easy to communicate with, and goes above and beyond to provide you with insight about properties you are interested, as well as the areas that these properties are located in. Tour the homes, take notes, take pictures and videos, and be as transparent with your likes and dislikes as possible with your agent!

When you find your home, have your real estate agent negotiate an offer that is fair based on location, size, and value of comparable houses. When you reach an agreement with the seller, the home goes into escrow.

Be sure to get a home inspection within a few days of your agreement to make sure that everything is A-OK with your home, and to make sure that any issues found are can be dealt with through renegotiation, withdrawal without penalty, or understanding what else needs to be done. If there are issues with the home that you want to discuss with the seller, know your options! Ask the seller to fix issues before closing the sale.

Step 4: Find an amazing Loan Officer + CLOSE!

You’ve settled on “The One.” Congrats! The next thing you need to do is find a loan officer that will help you navigate the waters of financing your home through an NC housing loan. A loan officer should be many things, especially transparent, passionate, and accountable on top of other traits. Be sure that you choose a great loan officer, and that you discuss any eligibility you may have for special types of loans like (VA Loans, Jumbo Loans, etc.). You will also need to discuss whether a 15-year or 30-year mortgage works best for you. Once you and your loan officer find a payment plan that best suits your needs, they will arrange for an appraiser to ensure that you will be paying a fair price for the home.

Following an appraisal, the paperwork begins. Your loan officer will coordinate everything and ensure that all rules, ordinances, and laws are met with your home purchase. Once this step is complete, you can close the sale and enjoy your new home!

Alpha Mortgage is a full service mortgage banker offering in-house processing, underwriting, closing and funding. In addition to new purchase loans, Alpha Mortgage specializes in home refinances with various programs and the lowest rates. Our mortgage professionals are well versed in all aspects of how the refinance process flows and can look at your previous loan package and find the best way to make your new mortgage work best for your financial goals.

Difference between Modular, Manufactured, Hybrid, and Stick-Built Homes

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So you’re looking into building a home. Great choice! There are many benefits of choosing to build over buy, including total control over customization, special features, low maintenance costs, warranties, amenities, home-site selection, energy efficiency, and more. However, before you begin the actual building process, it is important to understand a few construction terms. The first thing you’ll need to understand is the differences between manufactured, hybrid, stick built, and modular homes so you can choose the best option that suits your home’s needs. Let’s break it down:

The main points of differentiation you should note when it comes to manufactured, modular, stick-built, and hybrid homes are the locations in which home construction occurs. Other differences include guidelines, price, materials, as well as time to build. Take a deeper look into each below:

Stick-Built Home: A stick-built home is the most common & traditional building method of home construction in America, and refers to a home that is built 100% on-site from the ground up in complete accordance to all local, state, and regional guidelines. All materials are delivered to the job site, and the building happens through various subcontractors and 3rd party vendors. All of the work happens on-site as opposed from in a factory. While Stick-Built homes may be the most popular due to the option of complete customization, they normally take a little longer to construct due to weather delays, high moisture content in lumber, coordination issues, inspection delays/rework due to failed inspections, and typically cost more as well. However, Stick-Built homes tend to appreciate in value.

Manufactured Home: Also known as a “Mobile Home,” the manufactured home is built entirely in a factory. These homes are built according to specialized guidelines set out by the HUD instead of building codes at the desired location, and ensure that all areas of the manufactured homes meet strict guidelines. A big difference between manufactured homes opposed to other options is that they are transported by a vehicle and once at the desired location, the wheels are removed, setting the home in place. They are permanently attached to a black, steel chassis, which acts as floor system support. They are generally less expensive and take exponentially less time to build than Stick-Built or Modular Homes, however some communities do not allow manufactured homes in their area and tend to depreciate over time.

Modular Home: There is no true “definition” of a basic modular home since they can range in size, complexity, and price. However, one main point of distinction is that modular homes are built in sections in a factory setting, and are then transported and put together by a builder or contractor on your building site. Modular homes are built according to local, state, and regional building codes for the destination site. Modular homes have been gaining popularity due to their inexpensiveness, construction time, and tendency to appreciate in value, paired with the many options to customize and that they don’t “look” like they were made in a factory setting.

Hybrid: Hybrid homes are also known as “on-frame” modular homes. They aren’t exactly a true manufactured home or a true modular home, but a blend of the two. They’re typically built to the minimum requirements of state, local, and regional guidelines like a modular home, with the black steel frames like in a manufactured home. They are considered real property; however, they’re typically built with lower quality materials. They cannot be two stories, but they can come in one to three section ranch style houses.

There you have it! Once you decide which type of house you would like to build, the true fun begins. Let Alpha Mortgage help you in your home building purchase by contacting us today.

 

2016 Housing Market Predictions

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New Year, New Housing Market? Not so much. According to many housing predictions, 2016 will bring a whole lot of the same to the table. But is this a bad thing? Absolutely not. While 2015 was known as the best year for housing since 2007 due to many factors such as increased employment rates, implementation of TRID, and more, 2016 will also continue the housing market’s upswing- just not as exponentially.  We’ll start to secure a ‘normal’ in 2016. Remember that word?!

Here are our 2016 Housing Predictions:

  1. Increased Interest Rates– The Federal Reserve is expected to continue to raise interest rates in the short term between now and 2016’s end, & homeowners who have adjustable-rate mortgages or home equity loans will most likely see their interest rate rise as a result.  Housing wire goes as far to say that Fixed-rate mortgages will also rise, perhaps up one-half of a percentage point between now and the end of 2016, reaching 4.5% for 30-year loans. Despite this increase in interest rates, mortgage rates will remain historically low. If the rates do start to rise in 2016, as gradually as they may, we could see slightly lower home-buying numbers next year. But these changes will be minimal due to the continued increase in economic expansion and employment numbers- meaning more people are becoming able to afford houses.
  2. Evolving Mortgage Process – Mortgages may be in reach for more Americans in 2016 due to legislation that would allow Fannie Mae and Freddie Mac to take into account new ways to measure creditworthiness like evaluating rental history and utility bill payments instead of just the FICO credit score. More loans may also allow buyers to include income from room rentals, etc. More lenders are continuing to ease credit standards, and don’t see that changing in the future.  This is good news for potential homebuyers!
  3. Increased Housing PricesReverse Mortgage Daily reports that appreciation in national home price indexes will likely continue at a faster pace than inflation, but grow more moderately than last year. The CoreLogic Home Price Index was up about 6% over the last 12 months, and CoreLogic anticipates a rise of 4-5% during 2016. This increase in home sales and prices can be attributed to the improved economy, which has brightened the financial outlook for many families and enhanced their overall financial security. Prices may be higher, but they will still be affordable to most.
  4. More first time buyers– We expect first-timers to make up a bigger portion of the market than they did this year. The reason is simple: The market will be more welcoming to them thanks to the aforementioned slowing price growth and easier access to loans. It is important to note that Millennials & Young Gen X’ers are expected make up the largest demographic of home buyers in 2016 because they have recovered from the financial crisis, are entering their prime professional years, as well as their prime family raising years.
  5. Rental Homes & Millennials– According to a recent analysis by the Federal Reserve, outstanding student loan debt now totals more than $1 trillion. Student loan debt can create additional hurdles for mortgage shoppers. It increases the borrower’s total debt-to-income ratio, which can cause problems during the underwriting and approval process, and excessive debt can lower a person’s credit score. All of this makes it harder for Millennials to qualify for home loans.  This is why we predict rental homes will continue to increase in popularity- Millennials simply can’t afford homes. Rental vacancy rates for both apartments and houses are at, or near, their lowest levels in 30 years, and rents are rising quicker than inflation.
  6. Smart Homes/ Housing Tech – Smart homes and houses with more technological features available at time of sale will continue to become more popular. Features like beacon technology, security tech, VR and more will make homes more appealing. Smart home features will start to be expected by consumers in 2016.

We can’t wait to help you own your dream home in 2016! On behalf of all of us from Alpha Mortgage, we wish you a very happy New Year!

 

November Alpha Mortgage Recap

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Happy Holidays from your team at Alpha Mortgage! Tis’ the season to enjoy time with family in your beautiful new home! We are proud to serve the Wilmington, Charlotte, Jacksonville, Winston-Salem, Greensboro, Fayetteville and Asheville areas with the most competitive mortgage and lending services at the lowest rates. As we go into December, we invite you to check out the latest in real estate and mortgage news. And don’t forget – whether you’re on Santa’s nice or naughty list, we can make getting your dream home a reality!

November Housing Facts:

  • Most expensive place to live in America: Newport Beach, California.
  • Least expensive place to live in America: Cleveland, Ohio.
  • Google is now registered as a licensed mortgage broker. Though the company won’t be financing mortgages, it will aggregate quotes from local and national lenders it has partnered with, in order to help users find the best mortgage. It is important to recognize that the company will be paid by the mortgage lenders it has partnered with, so the “best rate” may not be just that. More to come once the model goes live.
  • Home prices increased, growing 0.1% for the month and 5.5% on a year-over-year basis from one year ago, according to the September house price index from Black Knight Financial Services.
  • President Obama signed a bill that caps the salaries of Fannie Mae CEO Timothy Mayopoulos and Freddie Mac CEO Donald Layton. According to the White House, President Obama signed the Equity in Government Compensation Act of 2015 on Wednesday. A statement from the White House states that the President signed S. 2036, the “Equity in Government Compensation Act of 2015,” which “suspends compensation packages approved for 2015 for the chief executive officers of (Fannie Mae) and (Freddie Mac) and any of their affiliates, and reinstates the compensation and benefits previously in effect.”

“Know Before You Owe” – The Impacts of TRID on the HomeBuying Process

In our last blog , we described how The “Know before you Owe” mortgage initiative will promote the transparency of information associated with mortgage and lending procedures – thus helping borrowers better understand and prepare for their home financing decisions. TRID also referred to as the “TILA-RESPA” rule  (an acronym formed by combining the Truth in Lending Act or “TILA” and the Real Estate Settlement Procedures Act or “Respa”) aims to simplify the disclosure and loan-closing process for consumers and better prepare buyers for their mortgage transaction.

We’ve compiled a review of how TRID Impacts lenders and borrowers below – Enjoy!

1. New Loan Disclosure Forms & Closing Disclosure Forms

Lenders must now provide borrowers with new disclosure forms that explain the loan estimate and loan closing process in more detail. This new Loan Disclosure form combines the Good Faith Estimate Form and the Truth in Lending Disclosure form have been combined into a new, simpler Loan Estimate form.

TRID also mandates that mortgage firms can not charge credit report check fees until the borrower has received the loan estimate form and has indicated intent to proceed with said firm. These new regulations should make it easier for consumers to shop for and understand the interest rates associated with different loan packages from different firms. 

TRID also gives rise to a new Closing Disclosure form that combines the final Truth-In-Lending statement and the HUD-1 settlement statement while providing details on the entire real estate transaction – including loan term, fees, and closing service costs.  

The accuracy and delivery of the new forms will be critical to ensuring the mortgage process is not derailed or delayed, and that borrowers have a smooth home purchase process.

2. Lenders must now provide Borrowers with the Loan Estimate & Closing Disclosure Forms in 3 Days

Three business days after the consumer provides a lender with their name, income, Social Security number, property address, property value estimate and mortgage loan amount sought, the send that consumer his/her Loan Estimate & Closing Disclosure Forms.

3. Longer Approval & Closing Times

In order to comply with the regulations imposed by TRID, lenders will be extra careful while both evaluating clients & filling out necessary paperwork – thus translating to longer approval & closing times and pretty much eliminating the the possibility of closing ahead of schedule.

 

Unfortunately, this extended loan closing timeline resulting from TRID will impact the home buyer’s move-in logistics and timeframe. Nevertheless, the increased transparency regulations will undoubtedly help more home buyers understand their loan options.

 

 

TRID For The Borrower- What It Means

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There are officially t-minus two days until ‘TRID Day’, and whether you are a potential borrower or an existing lender, there are no reasons to panic. On October 3rd, 2015, the TRID (also known as the ‘Know Before You Owe Rule’) Rule  will be implemented by the Consumer Financial Protection Bureau (CFPB) as a way to better inform and protect borrowers during the lending process. TRID (short for TILA-RESPA Integrated Disclosure) is the merging of the Truth In Lending Act and Real Estate Settlement Procedures Act that aims to make the mortgage process more streamlined and highly functioning for regulators, borrowers, and lenders. Its goal is to create a more informed and therefore better protected consumer through regulated time constraints and clear, comprehensible documents for the consumer-which is why the act has attained the nickname ‘Know Before You Owe’.

The change comes in a time where transparency in every industry is essential for consumer trust and transaction, and when the Real Estate Industry has a need to shift priorities from stimulating the economy towards borrower comprehension in the lending process (seeing as it is one, if not THE biggest financial decisions they will make in their lives). The idea is that more time and more consumer-friendly documents will create breeding grounds for an all around more informed borrower.

So what specifically is changing under the TILA Act, you ask? Not too much. Here are the biggest two changes in the process:

1) Loan Estimate– As Rayce Robinson explains, what was originally the Good Faith Estimate has now changed to become the “Loan Estimate” or LE. The LE is created at the beginning of the lending process following the application submission of the borrower to their preferred lender and provides potential borrowers with a clear and accurate disclosure of any estimated fees during the lending process. The LE breaks things down for the buyer as well as makes it easier for buyers to compare estimates between firms.

2) Closing Disclosure– The Closing Disclosure, or CD, replaces the HUD-1. The CD is a detailed and accurate disclosure of every fee needed to close. The main difference with the CD is that lenders are required to provide borrowers with the document 3 days prior to closing to give them adequate time to compare the document to the LE as well as ask any questions they may have. Since last minute changes tend to occur when buying a home, after the borrower signs off on the CD, the lender need not add additional 3 days for changes unless they fall under three exceptions. 1) The last minute change caused APR to become inaccurate, 2) Borrower wants to change loan program, or 3) a pre-payment penalty was added to the loan.

The idea is to integrate the 3 days, not add them- something that will require planning, focus, and organization from all parties involved in the lending process.

TRID is going to be a refreshing change for the consumer in the Mortgage industry, and the biggest takeaway a potential borrower can get from the change is that there will be more transparency in a more simplistic fashion. It is important to find a lender who is trained, has tested, and integrated TRID methods into their practice- and at Alpha Mortgage, our loan officers are trained, tested, integrated and PREPARED to provide you with the best experience possible. Contact us today!

*Note: If you are looking to secure Home Equity Lines of Credit (HELOCs), a reverse mortgage, or a mortgage secured by a mobile home or dwelling not attached to real property, it is important to recognize that TRID won’t apply to you. *

How Much Does It Cost To Refinance My Mortgage

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You’ve done your research on the best time to refinance your mortgage,and you are ready to start the process before the Federal Reserve decides to start raising interest rates again. It seems like everything else is in place: you plan on staying in your home for a long time, lending conditions have eased, and current mortgage rates are extremely low. Refinancing or “resetting” a mortgage is a great option for homebuyers that want to take advantage of market conditions like lower interest rates over time, take the opportunity to reduce the term of their original mortgage, or acquire cash from the home’s equity value to use on other purchases through cash-out refinance transactions. Homeowners can also benefit from refinancing by reaping the rewards of an improved credit standing in most situations.

But how much does refinancing your mortgage actually cost? One thing that most homeowners forget to consider when considering a refinance is that there are fees associated with the process. These fees vary based on location and company, which is why it is essential to shop around before you refinance your mortgage. Below are some fees to keep in mind and to discuss with your lender before making a refinance decision:

  • Administrative Fees: Just like when applying for your original mortgage, there are administrative fees that cover generating the information and data necessary to obtain refinancing contracts. Administrative fees to expect include paperwork fees, appraisal fees, application fees, loan origination fees, points fee, inspection fee, survey fee, title search/insurance fee, and others similar.
  • Closing Fees: Once you have been approved for your refinance, closing fees come into effect under names like paperwork fees, attorney review/closing fees, or closing costs. These can get pricey, so it is important to take them into consideration before applying.
  • Other Fees: It is crucial to understand the terms and conditions of your refinance like the back of your hand. Discuss with your loan officer things like prepayment penalties (fees that can cost anywhere from 1-6 month’s interest payments) that charge you for paying off your existing mortgage early, and other penalty fees that could impact you financially.

Most mortgage-related fees are paid upfront at closing, however some lenders offer “no-cost” refinancing, which includes these fees in your loan balance or interest price during the term of your refinance. Once you take into consideration all of the fees that will be associated with your refinance, calculate the break-even point of your new mortgage through online resources. If the refinance still makes sense financially, sign the papers! If you’re feeling overwhelmed, don’t fret. The Home Ownership and Equity Protection Act (HOEPA) protects those who refinance from high fees and interest rates.

Alpha Mortgage is proud to serve North and South Carolina with the best mortgage rates and informed loan officers. Need more information about refinancing your mortgage? Contact us today.

What is a Jumbo Loan & Would I Qualify

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It’s over halfway through 2015 and the luxury housing market is booming. According to the Washington Post, soaring prices and sales in the luxury market are factors due to the rapid growth of “jumbo loans” in the Washington area and around the nation. Nearly 1 in 4 mortgages originated in 2014 around the country were jumbo loans, spurred also by lenders’ efforts to make the mortgages more attractive to buyers. 

What is a Jumbo Loan?

A Jumbo Loan is a conventional mortgage with a loan amount that is higher than $417,000 in most areas of the United States, exceeding conforming loan limits imposed by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac, the large financial agencies that purchase the bulk of US residential mortgages from banks and other lenders, allow for institutions to free up money to lend more mortgages to those looking to purchase homes. Jumbo loans happen when Fannie Mae and Freddie Mac do not cover the full amount of the loan, which normally occurs when homebuyers are looking to buy larger, more luxurious homes, which come with a higher price tag.

Difference between Jumbo Loan and Conventional Loan

 In the past, jumbo loans have required higher interest rates from buyers, but according to the WSJ, low interest rates triggered a refinance flurry in the first few months of 2015 and the volume of jumbo mortgages—those above $417,000 in most places and $625,500 in some high-price areas—reached an estimated $160 billion in the first six months of 2015, up about 36% from a year ago at the same time, says Guy Cecala, publisher of Inside Mortgage Finance, which covers the industry. Since these normally higher interest rates have stayed relatively low, the main difference between a Jumbo Loan and a Conventional Loan is just the higher monetary amount and monthly payments that the loan is for.

Qualifying

So how do you know if you as a borrower qualify for a jumbo loan? To secure a jumbo loan, you must start by having a high credit score (greater than 700), and low debt-to-income ratio (no more than 45%)  . As a lender, there are some risks associated with providing jumbo loans since they are worth more money (and come with the potential to lose more). In order to secure a jumbo mortgage, you will have to put down a higher down payment than with a conventional loan. Along with a higher down payment (typically around 20% of the price of the home), the monthly payments and interest rates will also be higher- although in recent years interest rates for jumbo loans have been reduced. The Washington Post reports that today, the interest rates and down payment requirements are more aligned with conforming loans, making them more appealing for borrowers. Jumbo loan borrowers still typically need to prove they have cash reserves in the bank, a high credit score, a solid employment history and a low debt-to-income ratio in order to be approved.

Remember- jumbo mortgages are great solutions for those looking to buy higher-priced homes, and it is critical to do your research when trying to secure the best value. In the very near future, interest rates for jumbo loans are expected to rise especially if the Federal Reserve raises its interest rate benchmark (expected in September), so for the best rate, don’t wait! Need more assistance? We can help. Contact Alpha Mortgage today and make the first step in securing your jumbo loan.

Should I choose a 15-Year Mortgage or a 30-Year Mortgage

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So you’ve found your dream house, and have decided to start the lending process so that you can own the keys and start making it a home. Congratulations! Once you’re sure that you can afford the home, and have found an informed and transparent loan officer, the next thing as a buyer that you need to consider is whether you should choose to secure 15 year fixed mortgage, or a 30 year fixed mortgage. When determining which loan option is best for you, it is important to weigh out the differences in affordability, your degree of job security, as well as your saving habits.

The main difference between a 15 and 30-year loan is that fifteen-year loans typically have higher monthly payments with less interest, and thirty-year loans usually have lower monthly payments in which you end up spending more interest over time. The first step in determining which term to choose is using a mortgage calculator and crunching the numbers to figure out your specific individual options and the difference in monthly payments and total amount spent. Then, ask yourself what you can honestly afford. If you can comfortably make the 15-year fixed mortgage rates, do so. If not, the 30-year option is probably best for you. Remember that making extra payments when possible is always an option (although according to the FDIC, 97.3% of people do not consistently pay extra on their mortgages).

It is also essential to evaluate your job security and emergency funds when determining which loan to choose. Are you in a position/job with a paycheck steady enough to make those payments every month? It is important to remember that once you sign the loan, you will be required to make the same payment each month, and if you choose to go with a higher monthly payment (15-year loan) it is a good idea to have an emergency fund in place just in case something happens. If you don’t have adequate savings in place, or lack an emergency fund, it is a safe bet to go with a 30-year option.

Financial saving habits are also important to consider when determining whether to go with a 15-year or 30-year loan. Before choosing which term you want to have your loan on, evaluate your spending habits. According to USA Today, many people may lack the discipline needed to save long-term, especially in amounts that would offset what they would save by switching (from a 30-year) to a 15-year mortgage. A lot of times people need that extra money for something else, so they choose to keep their money in a 30-year mortgage with lower individual monthly payments. It is important to realize that you can always pay more of your mortgage off monthly, however, many people lack the discipline to send in the extra money every month when it isn’t required by the bank. If you are confident in your financial personal discipline, and do not tap into your savings (or will need to in order to afford a shorter term), a 15-year loan might be a good option to consider.

Be sure to consider your age and professional plan for the next 15-30 years when deciding whether you want to choose a 15 or 30 year loan. Are you planning on retiring? Do you plan on having children? What about other expenses that you will have (car, student loans, etc.)? Once again, it is important to answer these questions as honestly as possible, and to go over your options with your loan officer, who will be able to give his/her honest opinion based on individual circumstances and plans and which term will be best in your scenario.

Remember – in the end, your individual financial situation, goals, and comfort levels will determine which mortgage term you should choose, and what may be right for someone else doesn’t necessarily mean it will be right for you. However, a good rule of thumb remains: if you’re comfortable making higher payments (and have an adequate emergency fund), can meet other important financial milestones such as retirement and large expenses like cars and student loans, and have strong personal discipline when it comes to finances, a 15-year mortgage is a great option to own your home in half the time you would otherwise. If any of these conditions make you uncomfortable, it is better to go with the 30-year fixed loan and add in extra payments if you can. Let Alpha Mortgage help you make the right decision when it comes to choosing your loan term.

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