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Dec 20

San Francisco Business Times “S.F. developers add affordable units at their sites”

Dec 09

Mortgage Options When Buying Homes for Sale

If you’re paying the full price in cash for your new San Francisco Bay Area home for sale, then you can safely ignore this post. Otherwise, if you’re like most buyers, you’re going to have to finance your purchase with a mortgage. Whether you qualify and the amount of your monthly payments depend on the type of mortgage you get.

Fixed-Rate Mortgage

The more traditional mortgage fixes your monthly payment for the life of the loan, which makes budgeting easier. However, the higher obligation makes it harder to qualify for. For example, assume you take out a $500,000 mortgage and have an excellent credit score of 740 or better.

·A 30-year fixed-rate loan can start at 4.13 percent, according to Bankrate. This yields monthly payments of $2,423.

·A 15-year fixed-rate loan offers a lower interest rate, which starts at 3.17 percent. This means a lower overall cost for the entire life of the loan. However, because the term is shorter, your monthly payments are higher at $3,483.

Adjustable-Rate Mortgage

An adjustable-rate mortgage, or ARM, boasts lower monthly payments but only for the initial term of the loan. After the teaser interest rate expires, your rate goes up to match the prevailing conditions, which typically means higher monthly payments.

For example, a 5/1 ARM means the rate is fixed for the first five years and then adjusts every year after than. Such a mortgage starts with a rate of 2.64 percent, which produces monthly payments of $1,943. If you get such a loan, you have to be careful to have enough money in your budget to cover the payments at the prevailing rate when they come due.

These are only examples to introduce you to the differences in the main types of mortgage. Your actual payments will vary according to the price of the home, the money you put down, and the interest rate you obtain. You can contact us at Trumark Homes before you intend to buy the home, so we can prequalify you with our preferred lender. This process tells you the kind of home you can afford based on your financial situation.