The Corporation for Enterprise Development has made a huge announcement by stating the housing market’s foreclosure crisis was because of risky loans, not because of the borrowers—originally thought to be occurring because of a lack of education and unawareness of the loan risks. The study involved 260,000 home sales among low-income home owners, involving the 15 or 30 year mortgage interest rate. With today’s economy on the edge, not only low-income home owners are struggling with mortgages but we are seeing just as many upper class home owners losing their mortgages. In today’s economy, which mortgage would be better?
It has always been concluded that mortgage loans should never be paid off too early, which would make the 30 year fixed mortgage interest rate the better choice. This is a loan that has lower monthly payments and higher fixed interest rates, while building equity much slower than the 15 year fixed mortgage rate. But the 30 year fixed mortgage has lower monthly payments and locked-in unchanging interest at a time when jobs are scarce and times are rough. A big advantage is that people are able to keep payments affordable on smaller homes at a time when people are losing homes. The home owners who want to build equity at a faster pace should definitely go for the 15 year mortgage, but high monthly payments leave struggling people short of cash or dipping into savings at a time when any type of emergency could develops. They need to make sure they can make their payments on time.
Families or couples with financial issues should always buy a home on the 30 year mortgage plan for security reasons—when you can’t pay the mortgage the house is gone. Then if things change and money is not as much of an issue, extra payments can be made later on. The 30 year mortgage customer receives larger tax deductions because he will pay more tax-deductible interest in the long run. Alternatively, a home owner who buys his home on a 15 year plan should first make sure he can afford it while purchasing other important things—an IRA, a college savings or 401 (k) plan while keeping cash reserves at the same time he is buying his home.
If there is one thing that makes the 30-year fixed rate mortgage so popular, it’s that it makes budgeting for your monthly living expenses so much easier when you know that your mortgage payment is constant. So even though the 30-year fixed rate mortgage has a higher interest rate than other types of loans, the peace of mind that it provides to borrowers is worth it.
The recent housing crisis is a testament to the toll that adjustable rate mortgages can take on ones budget. If everyone that lost a home because of an interest rate adjustment had only had the traditional 30-year fixed mortgage, much of the collapse in the housing market may have been avoided.
As a real estate broker, I am always working with lenders. In the current mortgage climate, it has been difficult to find one that can deliver the goods on time all the time. Every real estate contract has a closing date that needs to be met. Many lenders today are finding it hard to meet that date no matter how much time you give them.
Six weeks from the time a real estate contract is initiated until closing is not unreasonable. Yet the big banks — Chase, Wells Fargo, Bank of America — rarely deliver, especially on the so-called government loans, FHA and VA. For some reason these loans pose a significant problem for the large, institutional lenders to process in a timely manner. Eight weeks is often not enough time. This can result in a great deal of stress for both buyer and seller. In some cases, buyers that have their heart set on a particular home have lost out to another buyer all because their lender couldn’t close the loan in time.
So who can deliver a mortgage loan on time? From my perspective, Quicken Loans is one of the few lenders that comes through with flying colors — even with FHA and VA loans. Quicken Loans is an online lender, so they are available in every state. Even though Quicken Loans employs the latest technology in the lending process, you are never more than a phone call away from a friendly loan officer for that personal touch.
Whenever you might be in need of a mortgage, as a home buyer or to refinance an existing mortgage, I strongly suggest you give Quicken Loans a try.
This is an investment condo in Boston–sale price is 5000–I am putting 25% down. No points. I have excellent credit. Would be interested in knowing 30 year and 15 year fixed rates. Thank you.
In June 2006 I bought a house with an 80 / 20 loan. The 80 is @ 6.65 % and the 20 is at 8.1 %. Both rates are 30 year fixed. Also I gave K down including closing costs. My insurance and taxes are in escrow and included in my mortgage payment to Wells-Fargo. I live in Miami.
The price of the house was 9,500 but the value according to Zillow.com is 5,000 and sinking!. My initial mortgage payment was 00 / month but has now ballooned to 32 / month!
I purposely avoided an ARM because of the eventual increase but even a fixed rate still increases due to taxes and insurance!
Has anyone experienced this? How did you handle it? I can’t refinance because I owe more than what the house is now worth. Plus it’s not really the banks fault it’s the county and states.
I can probably find an apt. as big as my house for 00 less per month (probably with a view of the ocean).
I am seriously considering walking away. Does a foreclosure only damage your credit? Any advice or thoughts?
Last year the taxes & insurance were about 00.
I can afford the payments, but I did not anticipate a 0 / month increase in less than 3 years. And it’s been going up every year. I have no reason to believe that it’s going to stop. Eventually I won’t be able to afford it.
I’m wondering what’s a common increase for my area and what I should have planned for?
Correction the taxes alone were 55 for 2008.
I am about a year and a half in. I had put down 20%
I know the feds just cut rates. I probably will only be there another 4-5 yrs. Would it be worth it to refinance? my house was 4,000 and i still owe 1,000
primacy-
what did you mean by make sure fico is 730+ and what is a 2-3 yr pre pay penalty?
We are purchasing a new home and the builder is upset we are applying for a FHA Mortgage. The contract was written that we would go conventional, however, FHA is a lower monthly payment, lower interest rate. They are telling me that I need to get a commitment for both types of mortgages – can I do that?
I have been researching mortgages for months and no one gives me a straight answer and even if it seems that they do. The next person I talk with has a conflicting answer. It seems that Brokers charge more closing costs but banks don’t seem to have as much information on the market and they seem more difficult to work with.
