MAKING SENSE OUT OF THE MORTGAGE MAZE
Bridgewater, New Jersey October 06, 2009
This past year, there’s been a great deal of talk about the state of the mortgage industry, leading many consumers—young and old alike—to consider putting their dream of homeownership on hold, at least temporarily. However, with rates at near-historic low levels and good deals on properties to be found practically everywhere, it truly is a buyer’s market, and there may never be a better time to buy.
"Owning your home can be a critical step toward building financial freedom," said Pete Makowiecki, senior vice president of MetLife Home Loans. "There are also important tax advantages linked with buying a home, including the First Time Homebuyers Tax Credit of up to $8,000, which is slated to end in November."
Before embarking down the road to home ownership, it pays to take the time to honestly assess your financial situation and set reasonable expectations. Take a good look at how much money your family is taking in, and create a list of what you expect your expenses will look like with the purchase of a house. Making these calculations will help you figure out how much of a mortgage is affordable. In general, experts advise that 28 percent is the maximum percentage of your combined monthly income that should go into a mortgage.
In addition, determine how much of a down payment you can afford to make—the more money you can put down, the more attractive your monthly mortgage payments will be. Down payments generally range from 5-25 percent of the purchase price. The amount you’ll be required to put down will depend on several factors, including the selling price, age, and condition of the house in question. It will also include things such as your credit rating scores and the requirements of specific lenders, which can vary.
The next step is to figure out how much you’ll need to borrow—or, more appropriately, how much you can afford to borrow. There are a variety of options available, including:
- Fixed rate: When you’re buying a home you plan to keep for a while, consider a traditional fixed-rate mortgage, with competitive rates on 15- 20-, or 30-year terms. This type of loan keeps your payment safe from market fluctuations.
- Adjustable rate (ARM): If you’d like to increase your buying power or lower initial monthly payments, an adjustable rate mortgage (ARM) may be right for you. Choose from 3-, 5-, 7-, or 10-year terms with affordable monthly payments.
- FHA loans: First-time homebuyers, borrowers who have less-than-perfect credit, and borrowers with little money to put down should consider whether a Federal Housing Administration (FHA) loan makes sense.
- VA loans: Veterans and active service personnel are eligible for special loans that often require no downpayment and lower interest rates than ordinarily available. For additional information, visit www.valoans.com.
Also, before you talk to a home loans specialist, brush up on the various terms that are used in the mortgage process—this will help you to ask the right questions about the specific mortgage that’s being offered. The U.S. Department of Housing and Urban Development has a handy guide to mortgage terms that’s available online.
For additional information on buying a new home, MetLife Home Loans offers a downloadable brochure called "Your Home," which is part of the award-winning Life Advice series and provides information on such topics as buying or selling a home, moving, and home safety. In addition, the company also offers web-based calculators, which can help first-time homebuyers determine how much of a mortgage they can afford, whether it makes sense to rent or buy a home, and a calculate to help determine monthly payments. All are available at www.metlifehomeloans.com.
MetLife Home Loans is one of the ten largest residential mortgage businesses in the United States, with a network of loan experts in all 50 states who are ready and able to assist customers with purchases and refinancing decisions. MetLife Home Loans is a division of MetLife Bank, N.A., a federally chartered bank offering a wide array of banking products and services, including high-yield savings, certificates of deposit, money market accounts, individual retirement accounts and residential mortgages. MetLife Bank is a wholly-owned subsidiary of MetLife, Inc. (NYSE: MET), a leading provider of insurance and financial services with operations throughout the U.S. and the Latin America, Europe and Asia Pacific regions. For information on how to locate the MetLife Home Loans office nearest you or to apply for home financing online, visit www.metlifehomeloans.com.