Real Estate Terminology 101: Adjustable-rate and Fixed Rate Mortgage

shutterstock 641065969

In real estate, there are many terms and expressions exchanged between experienced industry professionals. For individuals who are unfamiliar with this industry language, these words and phrases may seem entirely foreign. With this in mind, terms such as adjustable-rate and fixed-rate mortgages may also seem confusing as well. To develop a more thorough understanding of these words as industry concepts, consider the brief overview below.

Conventional loans

In understanding the distinction between adjustable-rate and fixed-rate mortgages, you must first understand the concept of conventional loans. If you want a conventional home loan, you can either choose between the fixed-rate and the adjustable-rate mortgage.

Fixed-rate mortgages are more popular out of the two options because the interest rate remains the same throughout the duration of the loan, which provides a homeowner peace of mind because of its predictability. Since it's the same figure each month, it is easier to budget. Conversely, in an adjustable-rate mortgage, the interest rate is applied to the outstanding balance and will vary throughout the loan in intervals of five, seven or ten.

Fixed-rate mortgage

Is a fixed-rate mortgage right for you?

Pros

-Easy to understand

-Makes it easy to manage finances

-Payments remain the same regardless of the market

Cons

-They are the same for all lenders

-May cost more in interest throughout the loan

-Have to pay the same rate even if interest rates decrease

Adjustable-rate mortgage

Is an adjustable-rate mortgage right for you?

Pros

-A cheaper option for borrowers who plan to move in the foreseeable future

-Ability to take advantage of decreased rates without needing to refinance

-Low-interest rates in the early stages of the loan

Cons

-More difficult to understand than fixed-rate mortgages

-Rates are unpredictable throughout the loan

Which one is best for you?

Do you plan on staying in your home for several years? If so, a fixed-rate mortgage is probably the better option for you. It will provide you with a stable bill every month, and you will not have to worry about rising rates from unfavorable market conditions. Another important consideration when trying to decide between the two is the current state of interest rates. For instance, if the rates are on the higher side, Adjustable-rate mortgages can be an excellent option for a homeowner. This is because they allow borrowers to take advantage of lower interest rates in the early stages of the loan.

Search for your next home here.

HUD Foreclosures

HUD foreclosures and VA Foreclosures are some of the best homes to buy when price is part of the equation. As with most Americans, price is always a concern. If not buying the same house for less, why not buy more house for the same dollar invested? When looking for a good deal it is hard to do better than the VA or HUD foreclosures market. The simple truth is that there are just more VA and HUD homes on the market, as they represent such a large number of mortgages that are generated each year. This translates into more foreclosures just by the magnitude of difference between all others comparing to the two largest.

The two largest also being government owned and operated means that they have less time to wait to make money back on the home. The FHA is especially known for selling HUD homes for less than the average sales price in a given area. FHA foreclosures represent a fraction of HUD but they are still a significant number of homes and both should be considered.

VA (Veterans Administration) and HUD (Housing and Urban Development) have different and unique opportunities for the buyer. Both are often forgiven for the local taxes normally associated with the purchase of a home (this is on a county by county basis). Be sure to ask the local title company or escrow company to look into it for you before closing as this is often missed due to their are not used to dealing with the 2 to 3 percent of the market that VA and HUD foreclosures represent.

Free Foreclosure Listings

ForeclosureWatch.com is a website that simplifies the process of finding foreclosures and HUD properties. Everyone thinks they are a real estate web surfing pro until they search for foreclosure homes and stumble upon a numerous sites that want to charge a fee to see their listings. With ForeclosureWatch.com that’s not the case. When searching for HUD properties or a home finding website for foreclosure it is important to know what you are looking for. It is important to use a niche company that specializes in foreclosures like ForeclosureWatch.com. We have put together 2 tools that have made the real estate search process of our website much easier to navigate. The Homesearch online tool is filled with foreclosure lists and free listings of hud homes for sale. Most of our users start with a broad search with the homesearch online tool to see the most HUD properties and foreclosure lists in your area and narrow their search down with the Homefinder online tool. The homefinder online tool is a custom filter system that we breakdown the area based upon filters such as convention and foreclosure listings. This give you the option to filter out conventional listings and focus on just the foreclosures in the market. We thank you for making us Americas top home finding website for foreclosure and Hud properties. Free listings of hud homes for sale are hard to come by but should always be free and that’s the way things are going to stay on our website.

Foreclosure Listings Increasing

As the market settled after the mortgage meltdown foreclosure listings also settled and fewer homes were on the market with a placard reading “Bank Foreclosure” in big red lettering. This was a good thing for the entire real estate market. Having an abundance of foreclosures brings the entire market down and it makes it harder for home owners, who would like to move, to get the appropriate price for their home as a similar home down the same street was sold for substantially less and the appraiser is using the foreclosure as a comparable sale.

This is just one of the problems when there are too many foreclosure listings in any area. Another issue is the television set that sits in everyone’s living room harping about the price of homes based on the number of foreclosures and this constant barrage of negative information makes most people sit on the sidelines waiting for the market to either implode completely or to correct itself. Meanwhile while they wait, others are buying foreclosure listings and making great investments.

Whatever the reason, a market can only handle so many foreclosure listings at any given time. The more foreclosures, the lower the market gets and this is a lesson the banks that were foreclosing and selling off realized too late. The market and their investments would have been better off if there had not been a rush to divest themselves of the toxic assets made more toxic by their own actions.