House Hunting - Is Time To Start?

Once you know how much money you can borrow and have an estimate of your closing costs, you'll know the price range you can afford. You might already have your "dream home" in mind. Perhaps you want to settle down in a particular neighborhood, or maybe you just need more space for your growing family.

Even if you know exactly what you're looking for, the house hunting process can be overwhelming. It takes time.

The First Step – A Reality Check:
It’s fun to look at houses. And this part of the process is very exciting, but don't let your excitement rule the house-hunting process.

Stick within your budget – don't look at homes above what you can afford – even if it's "just a little" more.

Don't let your heart rule over your head. You may fall in love with a property, but if it is beyond your means, it is not the right house for you.
Be flexible. Don’t be disappointed if the houses in your price range differ from your dream. Buy the home you can afford rather than the home that "has it all."

Compare what you'd like to have with what you really need.

Some good house-hunting tips:
Take pictures inside and outside the home.
Bring a spouse, family member, or friend.
Make sure the house fits into your budget.
Ask about utility and maintenance costs.
Think of commuting time and costs.
Consider your monthly budget – can you afford the renovations and maintenance that you'll need to do?

Don't make a "spur-of-the-moment" decision.
Additional tips to make the house-hunting process easier:
Concentrate on a few neighborhoods.

Decide what's most important to you about the neighborhood you want. This can greatly narrow down your search.

Find a real estate agent. They'll have many more listings than you can find on your own.

Compare homes. Make sure you know what you would get and what you would miss in each house before you make a decision.

Christmas Mortgage Present

There's some good news on the mortgage front for a change. Despite all indications to the contrary, mortgage lending has not come to a grinding halt. In fact, for those who have good credit and qualify for standard fixed-rate loans, mortgages have actually gotten more affordable.

The credit crunch has definitely made it harder for many people to get a mortgage. The subprime soap opera has continued to hurt lenders, most recently forcing Washington Mutual (NYSE: WM - News) to cut its dividend. Falling home prices have homebuilder Toll Brothers (NYSE: TOL - News) reporting its first quarterly loss in two decades. And executives at DR Horton (NYSE: DHI - News) and Centex (NYSE: CTX - News) still can't find a bottom in the housing market.

Haves and have-nots
But while some borrowers are getting shut out of the mortgage arena, others have an opportunity to reap rewards. For those stuck in subprime, lenders like Wells Fargo (NYSE: WFC - News) and H&R Block (NYSE: HRB - News) have closed their doors. But according to Bankrate, rates on 30-year fixed mortgages -- which used to be standard fare for the vast majority of borrowers -- fell as much as 0.8% since the beginning of the summer before bouncing back a bit in recent weeks.

Now, that may not seem like a lot, but lower rates have a huge impact on how much you pay for a mortgage. When you consider that the typical 30-year mortgage costs you more in total interest than you repay in principal, even small rate differences add up. The chart below shows what happens when you combine these falling rates with lower home prices.

Home................Price..........Loan Amt....... Rate.........Payment
Before Xmas..$250,000.....$200,000......6.375%.......$1,248
After Xmas....$240,000.....$192,000.......5.75%.........$1,120

Source: Fool calculator. Assumes 4% home price drop and 5/8% drop in mortgage rate.

As you can see, homeowners are starting to see some real savings. This 10% reduction in monthly costs can make the difference for people who are right on the margin of being able to afford a home. And in some areas, greater price declines have pushed even more buyers into contention for homeownership.

Rate moves and the Fed
A lot of this has to do with the Federal Reserve's balancing act between encouraging economic growth and keeping inflation under control. Low short-term rates have not only helped bond investors, but could also dampen mortgage resets on adjustable-rate mortgages. At the same time, although the Fed was widely criticized yesterday for not moving faster to boost the sagging economy, its conservative approach has kept long-term rates low as well, which in turn has helped fixed-rate mortgage borrowers.

Depending on whether you already own a home, there are a couple of ways you can take advantage of these favorable conditions:

Shop wisely. If you've been in the market to buy a home for a while, you may have set a price range based on higher rates. Have your lender or mortgage broker run the numbers again, this time using the lower rates that are now available. You might see your affordable range rise by $10,000 to $20,000 or even more.

Consider refinancing. Low rates are exactly what people who took out low-rate ARMs should have hoped for. While a fixed mortgage may cost more, it's still a better bet for many than waiting for an adjustable mortgage to reset at a much higher rate. And even if you already have a fixed mortgage, it's worth a look to see how much locking in a lower rate could save you in the years to come.

So while many homeowners will wait anxiously to see if they'll be eligible for the new mortgage bailout plan, prime borrowers may have a chance to cut their housing costs substantially. But rates can move quickly, so don't wait until after the holidays to see if you've got an early Christmas Present coming.

40 Year Mortgages?

40-Year Mortgage Rates: Lower Payments, Less Equity...

For years, the standard in the mortgage lending industry was a 30-year fixed rate loan. As opposed to other, shorter term mortgages, the low payments of a 30-year option was attractive to first-time homebuyers and those wishing to get much more house for their dollar. Yet as times change, home values have increased and mortgage companies have continued to change their services to suit their clientele. Now, savvy home buyers are choosing an even more cost-effective financing alternative: the 40-year mortgage.

There are two types of 40-year mortgages: the 40-year fixed rate mortgage and the 40-year adjustable rate mortgage, or ARM. There is a wide selection of 40-year ARMs available; lenders offering 40-year loans can provide more information.

The primary benefit of a 40-year fixed rate mortgage is lower payments, which means that it opens up the possibility of home ownership to a much larger demographic. Thanks to new 40-year mortgage programs, renters are finding that they can more easily become homeowners; homeowners wishing to upgrade to a new home are discovering that they can now afford much more; and those who may have a difficult time qualifying for a shorter term loan may find that the 40-year fixed rate mortgage is something that they can qualify for, based on the standard mortgage industry requirement of a low debt-to-income ratio.

The downside to 40-year mortgages is that because they are for a longer term, borrowers end up paying more interest. In other words, you'll be paying more for a home financed with a 40-year fixed rate mortgage in the long run than you would with a 30-year term loan?10 more years worth of interest, in fact.

More interest means less equity. Since more interest is attached to the loan, each monthly payment will contribute less to the principal than it will to the amount of the interest. Therefore, the longer the mortgage period, the longer it takes to build equity in your home.

However, since the majority of homeowners pay off their home loans early, it's possible that a borrower wouldn't have to pay interest on the entire term of the loan anyway. That often makes 40-year fixed rate mortgages good alternatives for people who are only planning on owning their home for a short time or who are buying homes in an area that is appreciating rapidly.

40-year mortgage rates are calculated based on current market standards.

Generally speaking, 40-year mortgage rates run about one-quarter to one-half of a percentage point higher than a 30-year fixed rate loan.

Likewise, interest rates for 40-year adjustable rate mortgages also vary, yet they are established with an introductory rate which lasts from 3 to 10 years, and then adjusts annually afterward based on the market.

The best way to find out what the current rates are is to use a 40-year mortgage calculator. We offer one on our website, just click here. Thank you.

Where to Find 40-Year Mortgages?

40-year mortgage companies were few and far between up until June 2005 when Federal lending program Fannie Mae began buying 40-year loans. Before that time, taking on a 40-year mortgage was too high of a risk for lending companies. Yet now, thanks to Fannie Mae, there are several 40-year mortgage companies who are willing to offer these attractive long-term loans.

Visit us @ Peak Home Loans