What are the BEST types of Mortgages and low down payments for your personal needs and situation?
We’ll talk about four things here:
a.) Low and no down payment programs.
b.) Non-advertised State programs. Local, county or city-sponsored Low interest programs.
c.) 30-year fixed rate mortgage vs. adjustable rate mortgage. Which is really better and how to save thousands, with the right one.
d.) Fixed rate, interest only mortgage.
With the banking crisis that started in 2007 and 2008, a lot of different types of mortgages have been wiped out. They no longer exist.
Fortunately, there are good mortgages that have survived and there are good, very appealing, low down payment mortgages and low interest rate mortgages that are still in existence. But, many folks are unaware of these and where to find them.
And the media has done a pretty thorough job of convincing buyers that all the low and no down payment programs have been wiped out, but that’s just simply not the case.
So the best types of mortgages and down payments for your personal needs and situation can vary. But for first time buyers, many like to have low down payment or even no down payment programs because they haven’t been able to save up a lot of money yet.
The low to no money down programs still DO exist. And they don’t even require you to pay a premium on the interest rate — and they’re still quite easy to qualify for – if you know where to find them!
As a matter of fact, there are even government-sponsored low money down programs where the federal government insures the loan. These programs get you in your home, with only 3% – 4% down payment. There are even some state and local jurisdiction programs with low and NO money down options.
Not all, but many of them will have different types of low and even no money down programs where they will help through bond referendums, bond issuances and even direct loans.
They will help you buy for NO money down or 1% – 2% down.
A lot of these programs aren’t advertised. But they exist. You just have to know where to look of course. Many times a buyer’s real estate agent will know – although not all of them. Some of your lenders will know about them. You have to hunt around for lenders, who have access to them.
These low to no money down programs are widely available … and they’re wonderful programs for first time buyers!
I help my clients find these kinds of programs all the time.
If you’re ready to learn more about low and NO money down programs as well as get your specific questions answered … go register for my FREE, LIVE Online Webinar!
Should I get a 30 year fixed rate mortgage, even though I know I won’t be there for 30 years?
The 30 year, fixed rate mortgage is what most people hear about. Most people think they know the difference between a fixed rate and adjustable rate mortgage.
They think, “Oh, adjustable rate. I’m scared. I don’t want to get near that. I want to stick with a fixed rate.”
Well, here’s my opinion on that …
When rates are very low, like 5 – 6% or so, it’s generally a wise idea to go with a 30 year, fixed rate mortgage because the adjustable rate mortgages just aren’t that much cheaper.
A 30 year, fixed rate mortgage, when it’s at 5.5%, is going to be just a little bit more expensive than an adjustable rate mortgage that is fixed for the first seven years, but starts at 4.5 – 5%. There’s not much of a difference.
However, it’s when interest rates go up when the real benefit is recognized.
Let’s say interest rates are back to a historical norm at around 8% – 8.5% on a 30 year, fixed rate mortgage. Then, quite often, you’ll find a seven year or even a five year adjustable rate mortgage — which means it’s fixed for the first seven, or the first five years, and then will only adjust once after that.
You’ll find these adjustable rate programs, instead of being at 8.5% might be as low as 6% or 7%. This makes a huge difference in your payments on a $200,000.00 loan. You can see payment differences between $200.00 and $400.00 a month.
If you add that up over the average time period a home is owned, which is seven years, we’re talking about a savings of over $25,000.00!
That’s not just chicken feed, is it?
And just imagine if you took that $25,000.00 savings and applied it toward principal repayments on your $200,000.00 loan?
Then you can actually come out ahead, so that when the mortgage rate does adjust in the future, even if the interest rate goes up, it will go up on a lower loan amount of approximately $149,000.00 – because you’ve paid it down so much –with the extra money you would have otherwise paid in pure interest.
Your payment may not only stay the same, it could actually go down. So again, we’re talking about mortgage management … a little more advanced techniques … but when it comes to interest rates being at a more historical norm, you really need to consider looking at some of the adjustable rate mortgages.
With proper mortgage management, you’ll not only pay your home down sooner, you could actually end up with a substantially lower payment for the remaining term of your mortgage!
Now the final thing I want to say about the best types of mortgages is fixed rate mortgages versus interest only mortgages. What’s the difference?
We know a fixed rate mortgage is fixed … or amortized over 30 years. And you have principal and interest being paid toward that loan.
An interest only mortgage is just that. It’s interest only. Is there ever an appropriate time to do that? Who would want to pay just interest and never have the house paid off? Believe it or not, quite a few people.
Some people know they’re not going to be living in a particular area for very long – maybe four or five years, maybe six or seven, and an interest only mortgage saves you a massive amount on larger mortgages in the monthly payments.
On a smaller mortgage, an interest only loan will save you a couple of hundred dollars a month. On a larger mortgage, it could save you five, six or $700.00 a month in your monthly payments.
So quite often, many people will be able to afford more house with an interest only mortgage. But I think it’s very important that you understand that just because your payments are lower with Interest Only mortgages, they should NOT be used as a tool to get into a more expensive house that you otherwise couldn’t afford, if you were to use a standard 30 year fixed rate mortgage.
I think you need to understand it is a way to save money for other needs on a monthly basis, instead of being used to put into your house. It should not be used as a way to afford more house. That’s how the tool can be used to benefit you, instead of hurting you.
To conclude …
As you can see, there are definitely loans that require low down payments, as well as loans requiring NO down payment. They exist in local, county and state levels.
They are, however, not advertised, so you need to know where to find them.
You’ve also learned the difference between fixed rate, adjustable rate and interest only mortgages.
Perhaps you read some of the testimonials on the page where you requested this e-course?
Then you know that many savvy, real estate investors and even professional real estate agents and mortgage lenders hire me as their personal buyer agent, at NO cost – because of my deep experience and knowledge of the N. VA market and my mastery of the application of ‘Insider’ techniques for saving thousands and thousands of dollars on their overall home purchase, costs, and financing.
This is probably the BIGGEST purchase you’ll ever make in your life.
So, I hope you’ll find the very BEST agent to represent you – someone who specializes in the ability to apply these strategies to benefit you in the N. VA market!
Be sure to check your email often, because in a few days, you’ll get your tenth ‘inside real estate’ secret. This will be your last email from me, and there’s a surprise bonus inside.
In it, I’ll be talking about some proven negotiation strategies that you can use to ensure you get the BEST deal possible.
If you would like more detail on the types of ‘Insider’ strategies would work best for you personal future home buying needs, then call my office for a FREE, over-the-phone consultation with me, and find out how I can represent you at no additional cost whatsoever! Call 703-222-6714. You can also e-mail me.
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Until next time,
Thierry Roche SFR, CDPE
Host of Talk Radio’s,
‘Inside Real Estate’