Real Estate Information Archive


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Mortgage Myths

by Mark Rieger, Mark Rieger Realty


Myth #1: The loan package with the lowest interest rate is always best.


You may be tempted to pick one home loan over another simply because the interest rate is lower; however, this could be a mistake. Many borrowers fail to look at the comparison rate, but it’s very important. Check the comparison rate of the loan to help you really understand the true cost of a loan. The comparison rate includes all the upfront and ongoing fees that need to be paid during the course of the loan. For example, some mortgages offer a low initial monthly payment but require a balloon payment. Some loans have an interest-only period, after which your monthly payment increases. Some loans have expensive costs and fees. Read the contract and don’t base your loan solely on the interest rate.


Myth #2:  A 30-year mortgage loan is always best.


30-year loans are the most common home loans because generally speaking, they have a lower monthly payment than a 15-year mortgage. But just because they are the most common doesn’t make them the best for every situation. The average homeowner stays in a home for about nine years. First-time homebuyers live in their homes for an even shorter amount of time. Some homeowners may find that an adjustable rate mortgage (ARM) could be a better option. ARMs begin with a fixed-rate period before the interest rate resets. The initial rate is often lower than the 30-year mortgage rate, meaning lower monthly payments. When the interest rate resets, the monthly payment is recalculated based on the remaining balance. It could end up lower if the borrower puts extra money toward the principal. ARMs backed by the government typically won’t increase by more than one percentage point a year and five percentage points over the life of the loan. ARMs work best for homebuyers who are reasonably sure their income will increase before the rate resets.


Myth #3: If I have bad credit, I can’t get a mortgage loan.


Your credit rating can either help or hinder the type of mortgage loan you’re offered. Having bad credit doesn’t automatically mean you can’t get a loan. However, it may mean that a lender might consider you a greater risk and give you a higher interest rate. Be upfront with your lender about your credit history before they even pull your credit report. Some defaults may have explanations that can be overlooked. Lenders generally want to help you get a loan. Shop around for different lenders and speak with several if you are concerned about your credit rating.


Myth #4: Once you are approved, you are guaranteed the loan.


The biggest mistake many people make when applying for a loan is they assume that once they are approved, they are guaranteed the loan. This isn’t true. Many mortgage lenders will pull your credit again between your approval and the loan closing. If your credit score has been affected negatively during this period, the loan could fall through. After being approved for a mortgage loan, avoid applying for new credit accounts and running up credit card balances. Keep your credit in outstanding condition during the entire loan process.


Myth #5: You should pay off your mortgage as soon as possible.


If you have debt other than your mortgage, it always makes more sense to pay down the higher-interest debt. Credit cards and auto loans generally have higher interest rates than mortgage loans. You may also want to consider investing the money where it can earn a return greater than the mortgage interest rate after taxes. It’s great to pay off a mortgage early if doing so satisfies a long-term financial goal. If you want to retire debt-free, paying off your mortgage early can help you completely eliminate debt. However, focus on higher-interest debt first.


If you have any questions, or if you or any one you know is looking to either Buy or Sell real estate in Central Oregon, please let me know. I am here to help!

Buying an Investment Property

by Mark Rieger, Mark Rieger Realty


Today’s low home prices paired with record-low mortgage interest rates make right now an appealing time to Buy an investment property. The market is also showing signs of recovery, so it truly could be a good time to invest in real estate.


However, before you jump at buying your first investment property. Consider the following:


  • Remember that old cliché saying: Location, location, location. The location of your property is important, especially if you want to rent it out. Stay away from rural areas where few properties are being rented. Look for properties in places with a low crime rate and a good school district.
  • Know what your options are. Do you want to become a landlord? Do you want to restore and resell properties? Would commercial real estate be a better investment for you? Many first-time investors start with residential housing, but it’s important to be aware of your options and thoroughly research them.
  •  What will the additional expenses be? You will most likely have more expenses than just the monthly mortgage payment on your investment property. Consider the HOA fees, utilities, ongoing maintenance, and insurance. Make sure your monthly cash flow will help you manage your additional expenses.
  • What are the loan requirements? For investment properties, there are usually higher interest rates and a larger down payment is required – usually 20 percent, since mortgage insurance isn’t available on investment properties.
  • What is your time frame? Determine when you want to purchase your investment property. Take your credit score into consideration. Make sure you will be able to get a good rate with your credit score. If not, you may want to work on improving your credit score before becoming a real estate investor. Also consider your cash flow and savings when setting your time frame.
  • Make sure the property meets your needs. Just as you would as a first time homebuyer, make a property wish list. Use a real estate agent to assist you in finding a property that fits your needs. Consider and prioritize your needs and wants, and look for a property with the most important features.

If you or anyone you know needs assistance in finding an investment property, please let me know. I am here to help.

Displaying blog entries 1-2 of 2