More Bang for Your Buck with Mortgages
by Elaine VonCannon

Choosing a knowledgeable mortgage lender can make a difference in the quality of home you are able to purchase with your finances. I prefer to recommend a mortgage broker to my clients, because they usually offer 50 or more programs. Regular mortgage companies are usually locked into one source. Take time to research a mortgage lender. And, remember, creative financing can be the way to go if you need a higher priced home with more space.
Home buying is different now then when your parents or grandparents purchased a home. When they bought real estate, 30-year mortgages were the standard. That's because 10-15 years ago, a person bought one or no more than two homes in their lifetime. Currently, Americans tend to own more than three homes in their lifetime.

Creative Financing
Find a lender who knows the business inside and out and can make your dollar go further. Ask your realtor to research the housing market in your area, to predict a rise in property value for that area. When you seek a mortgage, obtain quotes from three or more lenders. Make certain at least one of these is a mortgage broker. Ask how many loan products they have to choose from.

Flexible Mortgage
The 30 year mortgage is just one of many choices in the real estate loan market. Rebecca Nichols, a loan officer with Breakwater Mortgage in Virginia Beach, says, “It's not so popular anymore to do a 30-year fixed loan. People want options to help them get the most value from their investment. Some want to pay lower monthly mortgages so out-of-pocked expenses are less. There's no real reason anymore to be locked into a 30 year amortized loan.” Rebecca pointed out that in the beginning of the loan stages, most consumers are paying off the interest anyway.

A Twelve Mat Loan
This popular loan is based on the treasury market index, which is usually lower than the prime rate. For the first year the mortgage is at 1% interest. After that, it's usually a loan that is 3-5%. Some advantages of this type of loan include a choice between three different types of payment plans: minimum payment, interest only or principal and interest.

Interest Only Mortgages
One new trend in mortgages that is very popular right now is interest only loans. The buyer may elect to make lower payments for two years, five years, or ten years.

Adjustable Rate Mortgage (ARM)
Generally, a homebuyer is locked into a certain interest rate for a 3-year period with an ARM loan. After this the rate fluctuates with the prime rate. Rebecca Nichols, a mortgage broker, says, “I usually recommend people commit to an ARM rate for 3 years. When the value of the home has gone up, I recommend they refinance into a 30-year fixed mortgage or another ARM, depending upon whether they want to stay in the home.” There are interest only ARM loans available too. These loans are popular with real estate investors because the mortgage is easier to cover if they lack a tenant for several months. Interest only ARMS often homebuyers will be able to obtain a bigger house or something closer to what they want with an ARM.

80/20 Combo – Fixed or ARM
Some clients prefer to avoid paying mortgage insurance, which is not tax deductible. If this is their preference, Nichols recommends “finance 80% of the loan in one loan, and 20% in another. ARMS can also be split this way.

30 Year Fixed Mortgage
If you plan on residing in the same home for at least 20 years, this is the perfect way to go. It's a standard, fixed rate for the whole loan duration.
Remember to shop for a mortgage, just as you would for auto, home, health insurance, or auto loans. Be wary of obtaining your lender on the internet. Some sites may promise rock bottom interest rates, but the hidden costs and fees can add up. Also, having a lender present at the closing is an invaluable resource to the homebuyer. The loan officer or mortgage broker should be present to make certain the loan documents are correct and answer questions. A lender on another coast is probably not going to provide you with this type of service.
If you're in the market for a home and a mortgage, choosing the right lender will help you get more bang for your buck and the type of dwelling you desire.


About the Author
Elaine VonCannon is a REALTOR with RE/Max Capital in Williamsburg, Virginia, and she manages investment property as part of her business. Elaine is also an Accredited Buyer's Representative as well as a Senior Real Estate Specialist. She has helped numerous clients invest in and make money on property in Southeastern Virginia.