If you want an ARM but want to avoid the heart attack that comes with skyrocketing interest rates, you’ll need another mortgage term: a cap. And these days, some adjustable-rate mortgages have a cap that limits how high your rate can go, reducing your risk. While ARMs make some home buyers leery (they were involved in many of the mortgage defaults of the mid to late 2000s), there are times when it makes sense to get one. The bad news? If interest rates go up, well, so does your interest rate and payments, once the introductory period is over. The good news? The initial ARM interest rate is usually lower than that of a fixed-rate mortgage, and if average interest rates are low, your interest rate and the amount you pay every month will be, too. This type of mortgage does exactly what it says: Its interest rate will be adjusted by the lender in accordance with current interest rates, after an introductory period that could be three, five, seven or 10 years. But over the long run, avoiding the uncertainty of sudden rate hikes might be worth the peace of mind. While shopping around for the lowest rate, you will notice that interest on fixed-rate mortgages is almost always higher initially than on adjustable-rate mortgages (see below). This can be good or bad, but it will always be predictable. Once you lock in your interest rate with your lender, that’s it: The rate remains fixed-your monthly payments will remain the same for the life of the mortgage. If you don’t like surprises-like a sudden jump in your mortgage’s interest rate-then this type of mortgage is for you. Right now, interest rates are hanging around 4% for 30-year, fixed-rate mortgages (more on what that means later). Just like your car or college loan, you will pay back the money you borrowed from your lender (most likely a bank) with interest-a percentage of the principal that you borrowed. Nothing is free, especially when you are using someone else’s money. This mortgage term refers to what you will be paying off, monthly, over the lifetime of the mortgage, which can last anywhere from five to 30 years-usually 30. Yay! The rest of the money you still owe on your home is called the principal. Miracle of miracles, you’ve made your down payment. You can still find mortgages that require less than a 20% investment, but be warned: You will typically pay for that privilege down the road with a higher interest rate (see more below). The days of no-cash-down mortgages are mostly a thing of the past-and for good reason (We’re looking at you, subprime mortgage crisis). Don’t have that much money lying around? You might have to do some searching. In some red-hot markets, buyers expect higher down payments, sometimes as much as 40%. Traditionally, down payments are 20% of the purchase price, so if you are buying a home for $500,000, your typical down payment would be $100,000. Basically, you can expect a realtor to follow a certain code of ethics.When you and the seller agree to a price, you will need to make a down payment-the lump sum in cash that you can afford to pay at the time of purchase. Property managers, appraisers, and real estate counselors can also be a part of NAR. NAR lays a strict code of ethics for its members. Then what about realtors? In the US, realtors are members of the NAR (National Association of Realtors). Most real estate agents will work on a fixed-price commission. So we have a broker agency, and real estate agents are working with that agency. In that understanding, a real estate agent works under a broker.Ī broker takes things to the next level as a broker is licensed to establish a real estate firm. A real estate agent must pass an exam to be qualified for this job. However, you’ll see two other terms, “realtors” and “brokers,” used interchangeably.īasically, a real estate agent is licensed to sell a home in a state. The term real estate agent is commonly used to represent real estate professionals in the US. An agent is a real estate term to describe someone who will help you find the right property or buyer. Most of us also don’t know about realtors and brokers.Ī real estate agent is one of the first persons you’ll meet in the real estate market. Most people don’t know how to find a real estate agent.
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