Overview
Even with stricter regulation and fewer independent companies offering loan products, there are an abundance of mortgage programs from which to choose when purchasing a home. Knowing which mortgage is best for your situation requires more than simply looking at the interest rate and monthly payment. Each program has its own nuances that must be weighed against the long-term plans for the home.
Step 1
Estimate how long the home will be owned and financed. If this is a home in which you intend to retire, a fixed-rate loan may be ideal. If the home is going to be sold in less than five years because of an expected job transfer or change of household size, paying for the security of a fixed rate for 30 years may not be the best way to go.
Step 2
Determine how much down payment will be used for a purchase, or how much equity is available if the loan is a refinance. If the loan-to-value, which is the amount of the loan vs. the value of the home, is over 80 percent then private mortgage insurance, or PMI, may be required. Some banks and private lenders may not require PMI on all of their loans, but instead may raise the interest rate instead. Compare the monthly cost of the mortgage insurance against the extra cost of the interest rate. Lenders must remove PMI once the LTV is 80 percent or less, when the homeowner requests it. The lender does not have to modify the interest rate in the same situation.
Step 3
Choose if a fixed rate, adjustable-rate mortgage (ARM), or hybrid ARM (usually fixed rate for a three, five or seven years, then adjustable every year after) is most appropriate for your situation. Fixed-rate loans come in terms ranging from 10 years to 40 years, with 30-year and 15-year loans being the most popular.
Step 4
Calculate the time to realized savings each loan provides against the current loan, if it is a refinance. Take the current loan payment and subtract the new loan payment to calculate a monthly savings. Divide the total closing costs by this monthly savings to determine how many months it will take to pay for the closing costs. Usually the fewer months required to pay for the closing costs the better.
Step 5
Compare purchase loans by comparing the rates and total closing costs. The same basic formula can be used. If the closing costs are higher by $2,000 but the payment is $100 less, it might make sense to pay more upfront if you will be in the home for more than two years to come.
Finding a Mortgage
There are many options when looking for mortgage in today's market. How do you choose between the online bank, mortgage brokers, big bank or small independent bank. The Island is a unique place, we recommend talking to local lenders on the Island during your search for financing.
For a general idea of what your closing costs will be:
Click here for the HUD Settelment Cost Booklet
Banks on Martha's Vineyard
Martha's Vineyard Savings Bank | (508)627-4266 | |
Sovereign Bank | http://www.sovereignbank.com | (508)696-4463 |
Edgartown National Bank | (508)627-1161 |
We encourage you to start the home shopping process with a pre-qualification letter. You simply give basic financial information and are advised, based on the infrmation you share, the size mortgage for which you may be approved. Wells Fargo Bank provides an easy and free way to complete this process online at Pre-Qualification Application.
You can find current island mortgage rates at:
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