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 | Some Myths and Truths About Home Loans
Guest
Columnist:
Tom Howes
tom@howesmortgages.com
Howes Mortgages
Myth #1:
Interest-Only Payment options are a predatory
tactic of some shady lenders.
It is true that interest-only payments can create some problems for
people who get them as their only way of buying the house. Because, after the
interest-only period is over, the borrower may have trouble making the new
higher payment.
However, interest-only payments can be a very useful
option for some people, especially if they only plan to own the home for a few
years. If your company transfers you frequently, and the home will be for sale
again in a few years, it could be a perfect option for you.
Myth
#2:
Don't Trust Brokers, They charge you on the back end of the loan.
I've heard people say that, and it is worth much clarifying. Mortgage Brokers
are dealing with wholesale rates and when they set the rates above wholesale
they receive a premium from the lender. That is what people mean when they say a
broker is charging money on the back. If you go into a bank or national direct
mortgage lender, they charge retail rates. If a broker charged you those same
rates, they would earn a large back-end commission from the lender. But, that
is rarely the case.
Brokers, for the most part, will almost always
beat retail rates. Most of the time, if you're an A-Credit, fully documented
borrower, the broker will give you the "par" or wholesale rate.
This
isn't always the case, so it is important you find a broker you can trust. If
you ask how your rate is being set in relation to the "par" or
wholesale rate, he may feel obligated to set your rate at a more competitive
rate.
Myth
#3:
Adjustable-Rate Mortgages are a sucker's loan.
The fact is,
Adjustable-Rate Mortgages (ARM) can be the best fit for certain borrowers.
Historically, the interest-rates on the initial period of ARMs has been lower
than that of Fixed mortgages. For buyers who only plan to live in the house for
a few years, they can often save thousands of dollars with an adjustable rate
loan.
If you decide to go adjustable, get one with a initial
fixed-period longer than you'll ever plan on living in the house. If you think
you might stay longer, ask your loan officer if the ARM has a low "profit
margin". That will give you a measure of how drastic an adjustment the ARM
might make.
If you have questions, call me at 763-482-4848 or email
tom@howesmortgages.com.
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