Q&A: A Practical Mortgage Guide

The world of mortgages can seem daunting and overwhelming. Fortunately, Better Than Loans strives to demystify real estate loans, making it easier for consumers to understand the often-overcomplicated nature of the banking industry.

• How often can someone refinance? People can refinance as often as they wish, but they should make sure that the costs associated with the transaction and refinance not only lower than monthly payments, but allows out-of-pocket expenses to be recouped while still living in the home.
• How long does someone have to wait to purchase a new home after a foreclosure? The answer to this question is variable, as it depends on the type of loan that was involved in the foreclosure. For example, the Veteran’s Administration (VA) requires a two-year waiting period. FHA loans require a three-year period and Freddie Mac and Fannie Mae usually require a seven-year period. These time frames can be reduced if extenuating circumstances are proven.
• When should someone pay loan points? Points average 1-percent of the entire mortgage balance, reducing interest rates by an eighth to one-quarter percent. Borrowers need to calculate how long they plan on staying in the home, which should help them make a decision if the out-of-pocket costs associated with buying points is worthwhile. If someone is planning to refinance their home within the next 5-year period, they may want to avoid paying any costs.
• When should someone consider taking out an adjustable rate mortgage? Known as an ARM, an adjustable rate mortgages may be feasible for people planning to move in a couple years. These programs often involve 3/1 or 5/1 arms and have considerably lower monthly costs. This is especially good for people who sell their homes, as then they don’t have to worry about the interest rate resetting at a higher rate. Once the term on an ARM expires, the interest rate usually increases by 2-percent, which makes them a risky loan for any long-term investment.
• With a 30-year, fixed-rate mortgage that is locked in at 3.5-percent, how long will it take before the payments begin being applied to the principle instead of the interest? With a 3.5-percent interest rate, 35 cents out of every dollar spent goes directly towards the principal balance. This amount gradually increases; it’s not until the 123^rd mortgage payment that half the mortgage amount actually is applied to paying off the principal loan. As with anything, the higher the rate, the longer it will take before payments are applied to the balance instead of the interest.

Better Than Loans offers assistance for home borrowers that may not apply for traditional bank financing. As a direct lender, they specialize in offering fast loan funding, including bridge loans, apartment building loans and commercial building loans.