Loan Maturity Matters
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If you have a potential client in the market for a mortgage, they may be overwhelmed by all the different options: conventional vs. government-backed, fixed vs. adjustable rate, 15-year vs 30-year. Determining which one is best is something Orion’s brokers excel at: how much your client has to put down on a home, the price of the home they want t buy, their income and credit history, and how long they plan to live in the home. What are some good beginning thoughts where brokers can add value?
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A broker will cover the basics with a client. Fixed-rate mortgages offer interest rates that don’t change and predictable payments, while adjustable-rate mortgages may have lower initial rates but may become more expensive since the interest rate eventually changes. Conventional loans are made by private lenders and don’t have government backing or insurance. Jumbo loans are a type of nonconforming loan, available for higher amounts than other kinds of loan, and don’t meet the guidelines of Fannie Mae and Freddie Mac. Government-backed loans, like FHA loans, USDA loans, and VA loans, tend to have more lenient credit and down payment requirements than conventional loans. If your client is over 62 years old and have equity in their home, a reverse mortgage to provide money after retirement may be helpful.
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Fixed-rate mortgages, as the name states, are loans where the monthly payment (principal and interest) are fixed, and therefore predictable. (This doesn’t mean that property taxes or insurance are fixed.) If rates drop, your client has to refinance to obtain a lower rate. Adjustable-rate mortgages have a lower initial interest rate, but when the introductory period is over (usually 3 or 5 years), ARM rates can adjust.

Mortgage Terms Matter: Guiding Clients to the Best Loan Solution

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A 15-year loan allows your client to build equity more quickly and pay less total interest. Loans with shorter terms also tend to come with lower interest rates, since they pose less risk to the lender. But the shorter term means monthly payments may be much higher than a 30-year mortgage. This type of loan can be a good choice for borrowers who can handle an aggressive repayment schedule and want to save on interest.

A loan’s maturity is one of the basic questions that needs to be answered when selecting the right loan for your client’s situation, and is one of the ways brokers can add value. There are many different types of mortgages, including fixed-rate, variable rate, conforming, nonconforming, conventional, government-backed, jumbo, and reverse mortgages. It’s a good idea to help your client research and compare different loan programs. Once again, this is a great area for brokers to add value versus internet lenders: determining the best type of home loan for your client’s specific circumstances.

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