Difference between fixed rate/adjustable rate loans?
So the difference between a fixed rate loan and an adjustable rate loan is that the fixed rate loan is just that, the interest rate is fixed for the life of the loan. With the adjustable rate loan the interest rate is fixed for a set period of time and then it adjusts typically once a year so you’ll see adjustable rate loans be 5/1 ARMs 7/1 ARM’s or 10/1 ARMs. That first number is the length in time of years that the interest rate is fixed. On a 5/1 ARM, the rate is fixed for 5 years and then it changes every year after that. Now a lot of people shy away from these adjustable rate mortgages because of the way it got some people in trouble back before the mortgage crisis occurred. Its still a good loan product if somebody knows they are going to be moving within a few years, say if they are on contract with an employer and they are only going to be there for three or four years then it’s a good loan product, or if they plan on moving in three years when their kids are out of high school, it's still a good loan product because they have that low fixed rate for that period of time.
Will my loan application impact my credit score?
I do get that question quite a bit, having your credit report pulled could as we say ding your credit score, the amount that it does is very difficult to predict because of the complexity of how credit bureaus calculate someone’s credit score. I will say that if you are getting your credit report pulled by a bunch of different companies, say for credit cards, store credit, like Home Depot, Macys, if you are applying for car loans, things like that, me pulling your credit score after that could lower your score, considerably more than if you haven't had your credit pulled in months. What it does, when you do that, it shows a risk to the credit bureaus that you are racking up a lot of debt at once and you can be what they consider a flight risk, taking on a lot of debt, and then just not paying back. So while it's difficult to say the exact amount. If you haven't had your credit report pulled in a couple of months, it's not going to impact your score by very much, if at all.
How can I improve my credit score?
While I’m not a credit repair specialist, I can give some helpful hints on ways to increase your credit score or to establish credit in the beginning. So aside from the obvious that, make your payments on time, don’t be 30 days late on your payments. It is good to have less than 30 percent of your credit limit as your balance, so if you have a 1000 dollar limit in your credit card, don’t go above 300 dollars because the credit bureaus hit you for having a large balance on your credit cards. Student debt doesn’t impact you very much, medical debt doesn’t impact you very much, but what they lower your score on mostly is based off your credit card debt. So it’s good to have less than 30 percent if you have a card and charge it, and then pay it off monthly that shows that you are making your payments on time, keep your balance low, that will end up improving your score. A credit report that I pull from my borrowers has a credit score improvement figure for each bureau on the first page so if they have a 718 credit score and interest rates improve at the 720 and above level, I can go in analyze their credit report and find out what needs to be done to get to that 720 and above mark, typically it’s just paying down some of that revolving credit card debt.
How will rising interest rates affect me?
So the way that the rising interest rates will impact a buyer and their ability to purchase a home is best explained through an example showing what impact it will have on the payment, so for every 100,000 in loan amount, a quarter of a percentage point increase in the interest rate, will increase the monthly principle and interest payment by 15 dollars. So a typical loan size is about two hundred thousand dollars, if your interest rate went from 4.25 percent to 4.5 percent you’re going to see an increase in your monthly payment of 30 dollars, now how interest rates will move going forward is tough to say, the analysis that I’ve read shows that by the end of this year, 2017, interest rates for conventional loans will be around the 4.5 to 5 percent range, so they will increase some per the analysts, but it’s not going to be a large increase.
How much will the loan amount affect my monthly payment?
A good rule of thumb when it comes to how much the loan amount impacts the monthly payment is that for every $10,000 increase in loan amounts, the monthly principal interest payment will go up approximately 50 dollars.
What is the difference between a mortgage broker and a bank?
The main differences between a mortgage broker and a bank involve the cost that the borower pays and the level of service that they receive. So a mortgage broker gets paid to collect all of the borrowers information and send it to a lender and that lender will then process and underwrite the loan. I've seen that fee go as high as 3 percent of the loan amount. As a bank we do not get paid a percentage of the loan amount to do the loan. We get paid a flat rate to originate, to process, and underwrite the loan. The broker is paid a percentage of the loan amount, 1%, 2%, 3%, just to be a middle man and find the best lender for that borrower. Now when it comes to the level of service, the broker can’t make a lot of the decisions that the bank can because the broker is acting as a middle man, they don’t have the power to make a lot of the designs, the final lender gets to make those decisions, where as we, as a bank, are in control, and can make the decisions a lot faster which helps to make the process go a lot more seamlessly.