Home Loans and Mortgages – The Selection Can Be BewilderingWritten by Charles Essmeier
For years, when someone wanted to purchase or refinance a home, choices were simple. The buyer chose either a 15-year fixed-rate mortgage or a 30 year fixed-rate mortgage. That was it. Of course, those were also days of twenty percent down payments, which seriously hindered ability of many Americans to obtain loan necessary to buy their own home. In recent years, more flexible loan types have become available and down payment requirements have been relaxed. There are now far more choices of loan types available for borrower than ever before. That can be a mixed blessing, however, as prospective borrowers now have to do a tremendous amount of homework in order to determine which type of loan might be best choice. The selection of loan types that are currently available can be quite bewildering, and wrong choice could cost prospective borrower thousands of dollars over term of loan.
The standard 15-year and 30-year mortgages are still quite popular. Each provides stability of a fixed interest rate and a payment that will remain same throughout duration of life of mortgage. When interest rates are near historic lows, as they are today, these traditional choices work well for most buyers. Buyers who find a 15-year or 30-year mortgage to be within their means would probably benefit from obtaining such a mortgage now.
In recent years, as home prices have increased faster than wages, lending industry has created more flexible types of mortgages designed to help buyers who may have trouble with traditional loans obtain financing. These types of loans tend to have adjustable interest rates:
The Adjustable Rate Mortgage, or ARM, has a rate that adjusts over time as spelled out in mortgage agreement. Typically, rate at time of singing loan is lower than that of a traditional mortgage, perhaps by one percent or so. The difference is that rate can adjust over time as market changes. The loan agreement will spell out how often rate may change and how much rate may change at one time. The agreement may also indicate a maximum interest rate that may be charged over life of loan. These types of loans are ideal for buyers who do not intend to stay in their home for more than a few years, or buyers who are purchasing in times of high interest rates, when there is an expectation that rates will drop over time.
| | Fix and Flip: What To FixWritten by Steve Gillman
You've bought a house, a fixer-upper you can make some money on. What improvements and repairs should you make? First of all, you need to know this before you buy, as I explained in another article. Before and after you buy, though, you need to have some simple rules with which to start analyzing possible fixes.Return On Investment A young couple was very disappointed when I told them there house was worth $110,000. "We just put $40,000 into remodeling kitchen!" they told me. I looked at kitchen. It was nice. They had added $10,000 in value to house by spending $40,000. This is a classic example of a bad return on investment. With fixer-uppers, you have do things which give most "bang for buck." Aim for a three-to-one return on improvements. If you're going to resurface driveway for $1000, it better raise value of home by $3,000. Even when you're just guessing, keep this three-to-one formula in your head, if you want to invest safely. How To Fix A Fixer-Upper With things like new curtains, you can't really estimate increase in value. What you can do, though, is group together many small repairs and improvements you are considering, and imagine how house will look when you are done. Then you can estimate whether you will have increased value enough to justify cost. It often is in small details that you'll get best return on investment, so look at these first. A new mailbox, flowers on porch, a raked yard and trimmed trees - $30 total if you do work yourself - can make a big difference in first impression potential buyers have. First impressions are important.
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