Homebuyers Consider a Credit Freeze

Due to its ability to process high volumes of federally regulated mortgages, Service 1st Mortgage can provide low-interest rates to its clients. Service 1st Mortgage also hosts a resource library on its website that advises homebuyers on topics pertaining to securing a mortgage, including credit scores.

Credit scores determine the type of mortgages and interest rates an individual qualifies for. If a criminal is able to use a person’s private information to take out loans or lines of credit, it can be detrimental to their credit score. Even if the individual reports the crime, the correction process can take months.

For this reason, many personal finance experts recommend freezing credit accounts. When a credit account is frozen, no one will be able to open a new account with the individual’s personal data. The three major credit bureaus all allow clients to freeze their accounts for free.

People interested in protecting themselves from fraudulent debts should freeze their accounts as soon as they begin house hunting. However, because lenders will need to review the individual's credit history, homebuyers should expect to pause the freeze temporarily during the mortgage approval and closing processes.

What Is an Adjustable Rate Mortgage?

Service 1st Mortgage is a full-service mortgage broker that caters to the needs of homeowners interested in obtaining or refinancing their mortgages. Based near Washington D.C., Service 1st Mortgage specializes in low-interest federal loans and connects clients to the best mortgage types and rates for their circumstances.

Adjustable-rate mortgages, also known as ARMs, are a type of variable home loan. ARMs begin with a lower than market average rate. Borrowers may sign on to this introductory rate for a set period between 30 days to several years.

When this period is up, the ARM rate will readjust to the market. However, some ARM agreements put caps on how much the interest rate can increase or the overall monthly payment. Since interest is compounded on an ARM, a monthly payment set too low can cause the loan holder to be underwater. This means the amount owed is more than what the home was sold for. This can be a disadvantage of an ARM. However, there are also benefits to choosing a variable rate mortgage.

For example, buyers who plan to resell their home before the introductory period is over can benefit from the lower mortgage payments. ARMs are also ideal for people who can pay off the mortgage before higher interest rates kick in or who anticipate a large increase in income over the next few years.

Why Homeownership Is Better than Renting

For more than two decades, Service 1st Mortgage has brokered first-time and refinanced mortgages for homeowners in more than a dozen states. At Service 1st Mortgage, loan officers review each client's circumstances to provide the best loan terms and home buying advice.

One question many first-time homebuyers struggle with is deciding when to stop renting and purchase a home. The answer largely depends on individual factors and the local real estate market.

Homeownership is best for people who feel stable in their careers and do not anticipate moving for at least three years. Further, since homes come with additional maintenance and renovation costs, potential buyers should have room in their budget to accommodate these expenses after making the mortgage payment.

In the long term, buying a house is almost always a better investment. In many real estate markets, average rents increase up to 5 percent every year. However, fixed-rate mortgages remain flat for decades. Over time, homeowners pay less for their housing than renters.

Buying a home also enables individuals to build wealth through equity. Renters cannot recoup their rent, while homeowners can tap into the value of their homes after they sell. And if the house increases in value, in some cases the gains are tax-free.

Benefits of a Higher Down Payment

Since 1999, loan underwriting and granting firm Service 1st Mortgage has served homebuyers across the country. Service 1st Mortgage’s team of experienced mortgage brokers handles all major home loan transactions, including calculating mortgage loans based on the homebuyer’s downpayment.

Some mortgage programs allow buyers to purchase a home with as little as 3 percent down. While this can enable people to move into a home who otherwise wouldn't be able to do so, there are some benefits to saving up the once standard 20 percent down payment.

Homebuyers who put down 20 percent or more of the asking price are exempt from the private mortgage insurance (PMI) requirement. This is a monthly insurance premium that lenders require homeowners with little equity in their homes to pay. PMI can add hundreds of dollars to housing costs.

Similarly, mortgage payments for homeowners who make a small down payment are higher. This is due to both a higher interest rate on their loan and a larger loan balance to pay off. Additionally, closing costs like origination fees are based on the loan balance subtracted by the down payment. In this way, a higher down payment can reduce the cost of transaction fees.