Wanna Buy A House? How Much Home Can You Afford?


Whether you are a 1st timer or an investor, let's take a step back and take a look at the fundamentals of mortgages and what they are actually designed to do. My background is 20+ years in banking & real estate financing! Therefore, my strength and objective is to help determine the right product for you and YOUR house goals! Every scenario is different so let's make sure you are getting the mortgage that best fits your needs and not your loan officer's needs.

The Basic Types of Mortgages

Fixed-Rate Mortgage-With a fixed rate mortgage the rate does not change over the repayment period, typically 15 to 30 years. Payments are made monthly by the borrower and include both interest and principal. The payment amount is fixed in the beginning, based on the interest amount charged on the loan. 

Biweekly-With a biweekly mortgage, payments are made every two weeks (26 payments in a year). A biweekly payment schedule is made via formal arrangement but some lenders allow additional payment toward principal without any prepayment penalty. 

Adjustable Rate Mortgage-With an adjustable rate mortgage, you are given a rate that varies with the interest rate changes in the economy. As a result the payment will fluctuate as well. These types of changes mirror the economic index. With a fixed rate mortgage, the lender bears a majority of the risk because if interest rates rise the lender is still obligated to lend at the agreed upon rate. With an adjustable rate mortgage, borrowers bear the risk based on the fluctuation of the market. 

Balloon Mortgage-A Balloon Mortgage is a mortgage where the borrower makes fixed payments based upon an established interest rate for a long term mortgage. Although, payments are made over a shorter period of time then the borrower is required to make a lump sum payment in order to pay off the remainder of the loan. The interest rate on a balloon mortgage is usually lower than a fixed rate loan based on a shorter time for repayment and less of a risk to the lender.

Conventional Mortgage-Conventional Mortgages are made by commercial lenders in a private sector. 

VA Mortgages-VA Mortgages are guaranteed by the Department of Veterans Affairs and are only available to eligible Veterans. These types of loans may be fixed or graduated payments.

FHA Mortgages-FHA Mortgages are guaranteed by the Federal Housing Administration and may be fixed or graduated payments. 

Reverse Mortgages-This type of loan utilizes the equity in your home as a secured loan. This is typically called a second mortgage. The advantage is the homeowner can reside in the subject property and the lender makes periodic payments to the homeowner over a specified period of time. This loan is often repaid by the sale of the home when the resident dies.

Home Equity Line of Credit-This type of loan is a line of credit based upon the equity in your home. The homeowner may access this line of credit at any time and the repayment process doesn’t begin until there is a balance.


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