Financing Your Home

Financing Your Southern Utah Area Home

One of the first items southern Utah home buyers should consider is the important aspect of how you will finance your single-family home, condo or townhome. If you read the article on the southern Utah Home Buying Process, one of the first items on that list was the finance process by having a mortgage broker pre-qualify you for your home loan. This article will take a look at the important elements of securing a mortgage if you’re not paying with cash.

Qualification Requirements

While qualification requirements can change often, generally speaking, you can purchase a home valued of about 2.5 times your annual household income. Remember, the amount that you are able to borrow will depend upon these factors:

  • Your gross annual income
  • Your employment history
  • Your credit history
  • Your current savings
  • Your debt
  • The amount of money you have available for a down payment, closing cost and earnest monies

Types of Loans – Fixed-rate Loans

There are many types of home loan products available. For the sake of this article we will discuss the two most popular types of loans in use today. With a fixed-rate mortgage, the interest rate remains the same during the life of the loan. The most popular fixed-rate mortgages are 15-year and 30-year loans. With a fixed-rate mortgage you know what you can expect your monthly payments to be each month. The only time your monthly is apt to change is when your escrow account is either over funded or under funded.

Escrow Accounts & PITI

The escrow account is used to pay for your annual property tax and homeowner insurance if your monthly payment is based on PITI or Principal, Interest, Taxes and Insurance. Monthly payments are normally made into a special escrow account for your homeowner’s insurance premium and property tax bill. Depending on your mortgage company, this feature is sometimes optional.

Adjustable-rate Mortgage (ARM)

With an adjustable-rate mortgage (ARM), the interest changes periodically depending on whether the ARM is a 3-year or 5-year. ARMs adjustments are tied to an index. Please understand this fact – while the monthly payments that you make with a fixed-rate mortgage seldom change, payments on an ARM loan will likely change. When considering any type of home loan, remember this important fact, there are advantages and disadvantages to each type of mortgage. Having an experienced Stratum Real Estate Group real estate agent by your side and a trusted lending consultant to fully explain each type of mortgage is the best way to select a loan product.

The Adjustable-rate Mortgage Index

What is it? An index is an economic indicator that mortgage companies that service your loan use to set the interest rate for an ARM. Generally speaking, the interest rate that you pay is a combination of the index rate and a pre-determined margin. The three commonly used indices are:

  • The One-Year Treasury Bill
  • The Cost of Funds of the 11th District Federal Home Loan Bank (COFI)
  • The London InterBank Offering Rate (LIBOR)

So Which Type of Mortgage is Best for Me?

Unfortunately, there is no simple formula to determine which type of mortgage is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to remain in your Southern Utah home. Because of our experience, our team of highly trained Cedar City real estate agents will point you in the right direction of a trusted lending consultant so you will make the absolute smartest decision possible concerning the financing of your southern Utah home. Contact us today for your initial home buying consultation.

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