Thread: Analyze different mortgage options for home buyers

To keep abreast on mortgage options is a good idea. But just the basics.
Having basic knowledge is helpful to a buyer especially if they're looking for a home to rehab and they'll need to qualify for a program designed purposely to dissuade any buyers to begin with. I.e. 203 rehab loans or USDA backed loan programs and their twenty page addenda and forty stipulations that make no sense. I don't work with these types of buyers for that very reason.

But..... having the basic information on these types of nonsense programs at the beginning of a business relationship will save a Realtor a lot of wasted time and money.

If the potential buyer (who's not pre-approved to begin with naturally), is a conventional loan victim, I mean, seeker, then just give them your mortgage guy's card and let them worry about the details.

Have the basics, if they ask, but that's all.

Think about it.

-CM

One other thing to add: When considering the different mortgage options, it is very helpful if you know how long you plan to own that home. You can then calculate the total costs during that period of time and find out which loan option is the least costly one.

How to Analyze Payment Options With a Mortgage Calculator.
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Thomas

Help you understand your financial options when buying or selling a home.
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Thomas

If you want to take this a step further, when you look at different mortgage options, look at the equity that you will have after certain periods. The mortgage options that give you the most equity is the one that you seriously consider. Let's say you expect to be in this home for 10 years, so you would look for the mortgage option that give you the most equity at the end of 10 years.

Some have asked me how do we calculate total costs for adjustable rate mortgages. The simple answer is you can't since no one knows how the rate will be adjusted. What I did for my clients was that I would give them 1) the worst-case scenario, 2) the best-case scenario and 3) an educated-forecast-scenario.

Most of the time people with ARM do not expect to keep it for a long time - they either will sell the properties after a few years or refinance with a fixed rate mortgage. For this reason, the variables are limited to only a few years so the total cost calculation is still "usable".

"...they either will sell the properties after a few years or refinance with a fixed rate mortgage"..They actually believe what they read in the news? Equity's going to return to 3.5-4% a year? -Brian Ellis Real Estate News Letter....

Include closing costs on a refinance if there's no equity...Boy they're a mortgage banker's wet dream. "I can save myself 1.5%!" Whoopie! Add in $5k closing costs and since there's no equity (their reason to refinance), and it'll take five years just to recoup the closing costs! Ha! I should obtain my mortgage originator's license.

The Internet is a good place to find the mortgage. You will find here a wide range of products can explore at your leisure, not a salesman to deceive you into trading pressure. Once you find that you think suitable for your individual needs of the transaction, it is easy to apply for a mortgage online.

Originally Posted by stevenl

I used to work in the mortgage business and one way that I used to help my clients comparing mortgage options is "total cost analysis". Most people only pay attention to the interest rates and monthly payments; however, when you have mortgages with different terms, such as 30 yrs vs. 15 yrs and fixed vs. variable rates, you need a better way to compare the different options. Calculate the total costs for each mortgage option, such as interests, closing costs, etc. over a period of time and see which option costs the least.

You should have added more on what is the proper computation on calculating those. Like giving examples to further understand what you are sharing about.