Loan Talk

 At open houses, the grocery store and sometimes just stopped at a red light I am approached by Orange County residents with questions about the types of loans available and the interest rates. There are many different types of loans that one can acquire relating to real estate. As with all contracts and loan agreements, read it and understand it before you sign it.

A purchase loan: You are borrowing to purchase a home from a mortgage lender, credit union or bank. Rates, loan costs and terms vary from lender to lender. Before you celebrate the great interest rate you obtained, get all the costs up front in writing. Whether you are a first time buyer, an investor or are downsizing from your current house, interest rates are at historic lows.

In 2014 Interest rates are expected to rise but not more than five percent. If you’ve been waiting for the best time to buy, wait no more. The one obstacle to purchasing your dream home may be that you will have to compete with other buyers who have also recognized that now is the perfect time to acquire real estate.

Home equity loan: using the equity in your current home to obtain funds. This loan goes in second position behind your first mortgage loan.

Refinancing: usually to obtain better terms and conditions including a lower interest rate. Sometimes borrowers will pull cash through a refi.

Bridge loan: used to provide temporary assistance with down payment by using the equity in your current home to purchase a new home. The majority of lenders no longer provide this type of loan.

Reverse mortgage: all borrowers must be 62 years of age or older to qualify. You must occupy the home as your principle residence. A reverse mortgage allows you to draw funds from the existing equity in your home. The loan is payable only when you sell or expire. The amount of money received by the homeowner is determined by the borrower’s age. You are still responsible for the payment of taxes and insurance on the property. Wells Fargo and Bank of America both of whom were responsible for 43 percent of funding reverse mortgages are no longer offering the loans. As the economy faltered and home prices fell, for some homeowners the equity evaporated making it a questionable investment for lenders.

Susan Saurastri is a Realtor with Star Real Estate. Contact her at 714-317-0664 or [email protected]

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