Every mortgage falls into some type of category and is designated as a particular program by lenders. A loan program basically includes the loan term (how many years you'll have the loan before it is paid in full), qualifying requirements (credit, income and assets needed for approval), and loan amount vs. property value. Lenders call this Loan-to-Value, or LTV. Loan programs are another area where mortgage brokers differ from bankers. Since mortgage companies have many lenders at their disposal, they can offer a myriad of programs. Banks don't have as many programs, because they don't like to take risks, and some programs are risky.
In order to understand the program that is best, let's consider The Mortgage Game's "big picture." The absolute number one mistake home buyers and home owners make, when it comes to mortgage loans, is not understanding The big picture. They see only the now. "How much do I have to pay today? How much will
A secret mortgage brokers keep, and they may not even know the loan cost me today?" They don't understand the importance of the life of the loan or, equally important, they have no vision of how long they will actually stay in a particular home or a particular loan. This is the big picture in the mortgage business - seeing past today into the future, both near and far. Just how long do you intend to stay in a home and in that initial loan, when you first purchase your house? The answer to this question should be the biggest consideration in what type of loan program you choose, and very few mortgage brokers and bankers explain this.
You see, explaining this takes an intimate understanding of the alternative loan programs available, and since so many mortgage brokers don't have enough knowledge on the various programs, they don't want to bring up different terms and rates. Furthermore, it can cost them money, since some of the alternative programs, which are probably better for you, may not give them room to make any Yield Spread Premium. So, they would rather steer you to a more conventional program and sell you a higher rate. So, remember the secret of The Big Picture!
"Recent studies indicate that most homeowners either move or refinance their mortgage within seven years. .
When it comes to loan programs, you see, the average American feels that a 30-year fixed rate loan is the best and only way to go, when buying or refinancing. What makes this such a misconception is only a very small fraction of homeowners live in their house for 30 years. Recent studies indicate that most homeowners either move or refinance their mortgage within seven years, and a large portion of this group does it in three to five years. So, these people have cost themselves potentially tens of thousands of dollars by taking a 30-year mortgage at a much higher fixed rate of interest than they could have gotten, if they had taken a different program, such as an Adjustable Rate Mortgage or ARM. Here are some loan programs to look into the next time you're buying or refinancing a home.
Pay careful attention to your own situation, or big picture, though, when considering which is best for you. Also, where most mortgage brokers are reluctant to say which is best, I am not. There may be a good reason to get one of the following loans, but I always recommend the ARMs. Keep reading, and you'll see why.
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