California Mortgages
Many a times, when people want to buy their own home, they have to take a mortgage. Read about the different types and how to get low interest rates mortgages.
A own home is everyone’s dream. We all work hard to fulfill our dream of owing a house for our family. How often do we plan to have barbecues in our backyard and invite all our friends and relatives for a gala party at our own house? And what would be a better place to stay in the United States than the western state of California? Blessed with natural beauty, diverse culture and Mediterranean-region-like climate, California is the best place to settle down with your family. No wonder places like Beverly Hills, Los Angeles and San Francisco have some of the richest and most famous names as its residents.
Owning a house is a dream which is no longer impossible or very difficult to fulfill. Thanks to mortgages, one can get the ownership of a house without having to fully pay for it upfront. Mortgages or Home Loans are financial instruments which every one of us should understand in detail before buying a home, because it often is a huge financial burden which one has to gradually repay over a decade or two. And, the monthly mortgage repayment often takes away a big share of what you earn in a month.
Mortgage Types
Mortgages in California are of broadly 3 types: a fresh new home loan, Refinance and Second Mortgage.
Taking a new loan
If you are taking a home loan for the first time on a property then it is called a new loan. Interest rates play a very critical role in deciding which mortgage to take. Based on interest rates, a mortgage can be classified as Fixed Rate Mortgage and Adjustable rate mortgage (ARM). As the name suggest, in fixed rate mortgage, the rate of interest during the whole loan tenure remains unchanged irrespective of the market conditions. ARM are mortgages where interest rates decrease or increase in accordance with the market interest rates. We have seen how interest rates have increased in the recent few months. So if one had a fixed rate mortgage, his/her interest payment would have been lower than the ones who would have taken ARM mortgage. Hence, if you think that interest rates are going to increase, Fixed rate mortgage could prove a better choice and vice versa. However, if your choice proves to be wrong, then you can think of refinance.
Refinance
By refinance, you close your existing mortgage and start a new low interest rate mortgage. However, this switch over has its own charges, called refinance charges.
Second Mortgage
Second Mortgage is an option when you need more money. Say that your house is worth $200,000 and you have a mortgage of $75,000. Now due to some external conditions, you need money. In that case you can take a second mortgage (say) of $30,000.
Lower rates mortgage
Before you start to apply for a mortgage, check out with various government agencies and see if you are eligible for lower rate mortgages. For instance, if you are a war veteran, then California Department of Veteran Affairs can give you a home loan at a substantially discounted interest rate. Loan programs of the State and Federal government are also worth a look. The Federal Trade Commission offers a fact sheet about Looking for the Best Mortgage.
Things you’ll need for taking a loan
Before applying for a home loan in California, it’s good to do some basic ground work. The Federal Reserve Board offers detailed information about Home Mortgages: Understanding the Process and Your Right to Fair Lending. Firstly, ensure that you have documents for all sources of income. This includes recent pay stubs, all W2s, receipts, etc. Also keep at hand your previous 2-3 years tax returns. Secondly, if the property is already selected then try to get some documents relevant to the property. A credit report is a must. Get your latest credit reports from either one of the 3 credit reporting agency; Experian, Equifax and Trans Union. Do your homework and get a fair idea about how much you need to borrow. While calculating your cost of home, do include brokerage cost, taxes, renovation cost, furniture cost, etc. Internet has many mortgage calculators. Use one of those and you will get an approximate idea of your monthly installments and interest outgo.
A own home in California is a much cherished dream and only you and your efforts can make the dream a reality.
© 2006-2008 All Rights Reserved. Please do not steal my work.