Which Mortgage is Right for Us?

---

Q & A with Dottie Herman
 
Question: What are the most common types of mortgages? How do I know which type is best for us?

ANSWER: The most common mortgage is the 30 year fixed rate mortgage.  Principal and interest payments remain the same for the life of the loan. If you plan on staying in a home for 10 years or less, you may want to look at an adjustable rate mortgage.  Unless you have a definitive plan to move, 30 year fixed rate mortgages are usually the best option.

Question: My husband and I have lived in our home for 40 years. We are both retired and need to make some improvements in our home. Is there a way to refinance and take some cash out for these improvements? Is that a home equity loan?
 
ANSWER: A mortgage (cash out refinance) or a home equity loan are your options.  Home equity loans typically have a higher rate than a mortgage, but Home Equity loans typically have little or no closing costs. Take a look at both options before deciding.

Question: We are looking to purchase a vacation home. Are lending guidelines any different for a second home? If we put down a 50% deposit will it make it easier for the bank to lend us money?
 
ANSWER: Banks will look at income, assets, and credit to make a decision.  50% down does limit risk for the lender, but your debt to income ratio and credit score will be very important.  Debt Ratios should not exceed 43 of your gross income.

Question: My parents are getting older. They have been retired for years and don't have a large amount of money coming in. They are in their 80's but still drive and are active. They need more money each week. Is a reverse mortgage a good idea for them? Can that money run out? I would prefer for them to not lose the equity in their home.
 
ANSWER: A government insured FHA reverse mortgage is a good option.  Your parents can elect a payment stream for as long as they are alive. However, the home must remain their primary residence.  Monthly statements show how much principal and interest are accruing on the reverse mortgage. 

Question: My home is on the market. I live in an area affected by Hurricane Sandy, but we feel our home has just appraised for much lower than expected. We have a buyer and they still want the home despite its lower appraisal. Will this create a problem for them getting a loan?

ANSWER: This could definitely be a problem.  If they are putting down a large down payment their bank may not have an issue with approving your buyer's mortgage, but if their down payment is minimal, that could create a situation where the buyers will need mortgage insurance or more money down. In situations like this the price of the home may need to be renegotiated.