Extramortgages

Compared to other homeowners, Californians pay one of the highest premiums in the country for their warm, sunny climate. According to the National Association of Realtors, the median price for a single-family home in California topped out at an eye-popping 542,000 in fourth-quarter 2005. While finding the best possible mortgage loan rate is important wherever you live, prices like these underscore the importance of doing your mortgage homework if you live in California.

According to Looking for the Best Mortgage, an article published by the Federal Reserve, getting a good rate on your California mortgage is basically a three-step process. The Feds strategy, which it calls Shop, Compare and Negotiate, says a mortgage is essentially a product like a car. Just like the price of a new Caddy, the price and terms for a home loan are often negotiable. So, says the Fed, it pays to shop, compare and negotiate.

The first step in the process shopping for the best home purchase loan, home equity loan or refinance loan is easier than ever. Thats because of the dramatic increase in the number and popularity of online lenders. Nationally recognized lenders like Home 123 or Ameriquest now offer a wide variety of mortgage products in many states, including California. Besides offering mortgage products that combine convenience and flexibility, online lenders are also available 247 to give you a free mortgage quote something that cant be said of traditional brick-and-mortar lenders like banks or credit unions.

Shopping around for your California mortgage is just the first step. After that, youll want to compare the offers youve received. Make a checklist that contains all the key information about rates, points, fees, the down payment, and the cost of private mortgage insurance. Set up the worksheet in a spreadsheet program like Microsoft Excel and give each lender a column of its own. That way its easy to compare lenders and the bottom line side-by-side.

Finally, says the Federal Reserve, dont assume a lenders offer is the last word in your search for the best California mortgage. Thats because mortgage lenders frequently offer different terms and rates to different customers, even if those customers are equally qualified for a mortgage loan. It pays to negotiate, so now is the time to show a prospective lender that youre a savvy consumer shopping for the best possible deal. Dont be afraid to ask for lower fees, a lower rate or fewer points!

In conclusion, when buying a home or negotiating a home equity loan or refinance loan, dont forget to shop around, compare offers and flex your negotiating muscles. That way youll get the best possible deal on your California mortgage!

Home buying should first start with determining how much of a mortgage you can afford. Sure, everyone would like to head out to the local real estate agent, find the homes that they really like, in the right area and then apply for their home loan. But, this is not the right way to do it. This way can actually leave you quite disappointed if you are not provided a loan that will fit your desires completely. Everyone has a different amount of house that they can afford. What you qualify for is something that is going to depend on what type of a risk you are to the lenders.

Before you begin your search for the right house, take a look around for the best mortgage. You should compare several companies that are in the business of home loans and see just what they can offer you. When you find the right company to work with, you will be able to determine how much of a home you are actually able to afford. Remember that the important things to consider in a home loan are things such as the interest rate and the terms of it. Some lenders will allow you to get a bigger loan than others.

Once you determine who actually to work with to get your mortgage, now, you will want to find out how much of a loan they will give you. What goes into this amount are many things including the following:

How much income you bring in on a monthly basis. The mortgage is likely to be paid monthly and they would like to determine if you have enough income coming into your home to afford to make these monthly payments.Your credit score. If you are a big credit risk, it is likely that you are not going to pay your mortgage payments in a timely way. You may miss payments or pay them late. This will hinder not only getting the home loan but also how much you can have.The value of homes in your area and the market. These things are changing every day. Some lenders will allow you to get a home that is more costly as long as you can afford it because home values are increasing. Others are more conservative.

Finding the right lender for the mortgage is the first step. One should work on improving their credit to the best of their ability before applying for a home loan so that they have the most ability to make payments. Having a steady job that provides a regular income and shows a past history of employment can also help to benefit you.

Remember that lenders are looking to make money from those that purchase a home through interest. They are not in the business of owning homes and therefore they do not want to take on individuals that are a high risk of defaulting on their loans. For that reason, you should determine how much of a mortgage you can afford before you head out looking for the home of your dreams.

With most mortgages, your payment is the same every month. But what if your paycheck isnt so regular? Would you like to be able to vary your mortgage payment depending on your cash flow? An option ARM — also called a flex-ARM or pick-a-payment loan — allows you to do just that.

How does it work?
An option ARM is an adjustable-rate mortgage with a twist. You dont pay a set amount each month. Instead, the lender sends a monthly statement with up to four payment options. You simply choose the amount you want to pay that month and then submit your payment.

The options vary, but heres the most common menu:

Minimum payment: This is calculated using an initial interest rate that can start as low as 1.25 percent. Because this payment is so low, its useful for months when you dont have much cash on hand, perhaps because you are waiting for a commission or bonus check. But any unpaid interest gets deferred, or added to the principal of the loan, so your principal grows.

Interest only: You pay all the interest due, but none of the principal. This doesnt reduce your mortgage balance, but it allows you to avoid deferring interest.

30-year amortized: This matches the monthly payment of a mortgage amortized over 30 years at your current interest rate. It includes both principal and interest.

15-year amortized: The same as above, but amortized over 15 years. This is the highest monthly payment. Choosing it allows you to reduce your principal faster than any other option.

The fine print
The biggest caveat with option ARMs is that those enticing initial rates are short-lived. The low minimum payments that make these mortgages so attractive can increase dramatically. In addition, every five years, the loan is recast — that is, a new amortization schedule is drawn up to ensure that the remaining balance will be paid off by the end of the loans term. When that happens, the minimum payment can be pushed even higher.

Whats more, if you defer too much interest, you can reach whats called negative amortization. If your balance grows to 10 percent to 25 percent (depending on state law) greater than the original principal, your loan is automatically recast and you have to start paying the fully amortized rate, which will increase your monthly payments.

Another potential downside of option ARMs is that theyre more complicated than most other mortgages. Home buyers may be seduced without fully understanding how much the minimum payments will increase over the long-term. When the monthly amounts go up, these people can experience payment shock.

To learn more about flexible payment mortgages, visit http:www.lendingtree.comcecyourhomeyourmortgageopen-arms.asp