Ventura Real Estate: 5 things to understand about your home loan

The recent mortgage meltdown should have driven home the lesson that understanding one’s home loan is critically important. However, most people fail to think about mortgages because they find the topic too complex.

In fact, a survey by Zillow Mortgage Marketplace found that borrowers who obtained a home loan in the past five years typically spent just five hours researching their options — that’s half the amount of time people spend researching a car purchase (10 hours). Nearly one-third spent two hours or less. Yet, a home purchase is one of the largest investments most people will make in their lifetime, and the type and terms of their loan greatly affects affordability. That’s why before choosing a home loan, borrowers should shop and compare mortgage rates as well as mortgage lenders and once they’ve chosen a loan, make sure they understand these five home loan basics:

1. Do you have a fixed-rate mortgage?

You might be surprised to find out how many people think they have a fixed-rate mortgage only to learn later that they don’t. There’s an easy way to find out what kind of rate you have (depending on how organized your files are). Find the packet of papers that you signed at the title company when you closed on your house and there should be a document titled “NOTE” at the top. If it says “ADJUSTABLE RATE NOTE” at the top in big capital letters, then you obviously don’t have a fixed-rate loan.

Why it matters: While adjustable-rate mortgages often feature lower rates early in the loan term, your rate and payments can rise significantly over the life of the loan. With a fixed-rate mortgage, your rate and payments remain constant. This is obviously an important distinction from a budgeting and financial planning perspective. Learn the differences between ARMs and fixed-rate mortgages.

Very practical advice. Be sure to read all 5 items. If you have any questions, give us a call. We work with some excellent lenders and we will be happy to put you in touch with one who can answer all your mortgage questions.