Buying a House - Mortgage Help

Mortgage Options

When it comes to Riverside real estate or Corona real estate, unless you are paying cash, buying a house and mortgages go hand in hand. In fact, even sellers need some mortgage savvy when dealing with potential buyers and their agents. Whether you're looking at Riverside homes for sale or putting your own home on the market, it helps to understand the different mortgage types available. Some terms you'll commonly encounter are:

Fixed-rate Mortgages

A fixed-rate mortgage has a single interest rate that doesn't change for the life of the loan. This type of loan offers the most stability among other loan types, and therefore works very well for most real estate buyers. The traditional term for a fixed-rate mortgage is 30 years, but some lenders offer terms as short as 10 years or as long as 40.

Adjustable-rate Mortgages

ARM loans have variable interest rates that change according to market conditions. A common feature in ARMs is the initial fixed-rate period, wherein the first few years have a low guaranteed rate designed to attract borrowers. This made it very popular in the Riverside real estate and Corona real estate market a few years ago, although the housing crisis has slowed it down considerably. ARMs are usually a good choice for buyers who plan to refinance in the next few years or who do not expect to stay in their homes for the duration of the loan.

Balloon Mortgages

In a balloon mortgage, you pay off your loan over 30 years just like a fixed-rate mortgage, but the balance becomes due earlier. Typically, you will make payments based on a conventional mortgage for the first few years, but you must pay the balance in full afterwards. Many people choose to refinance the loan afterwards to avoid the balloon payment.

Types of Mortgages by Provider

Conventional Mortgages

As the name suggests, this type of mortgage is the most common. Conventional mortgages aren't insured by the government and have down payment requirements usually of 20%.

VA Loans

VA stands for Veterans Administration. These loans are guaranteed by the VA and, as implied, are offered only to qualified veterans. VA loans allow you to finance 100% of the home; that is, you don't need to make a down payment. However, borrowers have to pay a funding fee at the closing, which can go up to 3% of the loan amount.

FHA Loans

These loans are backed by the Federal Housing Administration (FHA) and have  the lowest down payment requirements available. This makes it a popular choice for people buying their first home. In an FHA loan, you pay a one-time premium for mortgage insurance during closing, and a small premium is added to the monthly payments - called mortgage insurance premium. These premiums vary according to the loan-to-value ratio, so some homes will carry higher premiums than others.

Tips to Help Determine How Much Mortgage You Can Afford

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