Utah Mortgage Rates

Mortgage Rates in Utah

2009-08-20T04:06:00.000-07:00

Rates will always vary based on the type of loan and the credit considerations, income of the principal, other debt to income ratios and factors that will indicate the ability of the individual to pay back the loan.

Utah is not that different from anywhere else as far as mortgage rates go simply because the majority of the lenders are national lenders. The rates may change slightly based on the mean rates for a given area, or what is competitive. Of course these rates may still be subject to the economics of supply versus demand, but not necessarily isolated by one state vs. another.

There are a lot of indications on nationwide websites that the rates aren't going to change by more than a few points one way or the other by region. The banks and lenders may consider certain areas more risky than others, but, that hasn't been as responsible for major rate variations between regions.

You can typically find out most mortgage information by visiting the websites of the lenders. Be cautious, however, that you're comparing the same rates, whether a 30 year fixed rate, a variable rate mortgage or ARM (adjustable rate mortgage) or some other mortgage product. This way, you'll be able to compare and get an overall feeling for which lenders are giving you the best deal.

You'll also want to check their websites to find out about other fees associated with closing, whether or not those can be waived or wrapped into the loan, and if so, how that affects the rate. You can usually find a lot of solid information on the internet from mortgage companies when you initially start to narrow down the list, then go from there with phone calls and in person visits when necessary.

What Are Balloon Payments?

2009-08-17T14:47:00.000-07:00

When a clown makes cute little animal shapes, but instead of giving them away, he charges for them. This is what is known as a balloon payment.

Ha! seriously, though, a balloon payment is the remaining balance of a loan that is due at the end of a certain period of time. Fixed rate mortgages normally don't have these, but some types of adjustable rate mortgages and interest only mortgages will have a balloon payment that is due at the end of a specific term (sometimes 2 years, sometimes 5 or 10 years, etc).

This isn't difficult to understand what this is, but you need to know what happens when that balloon payment comes due. This may require some sort of refinance or a larger cash outlay which you'll need to be prepared for if you don't want to lose the house.

If you are into an ARM or interest only mortgage, be sure you know what you're getting into. Usually provisions to refinance should be arranged, but depending on the duration of the loan or term before the balloon payment is due, your life situation could change to where you wouldn't be able to qualify for a refinance when the balance comes due.

A good loan officer should be able to tell you how to proceed and give you the options and information related to the loan that you need to know in order to make an informed decision.

Interest Only Loan

2009-08-17T14:34:00.000-07:00

These types of loans aren't nearly as common as they were a few years ago when everyone was trying to buy up real estate for the lowest possible monthly cost. Most investors were trying to buy low, stick a tenant in to rent the property and cash flow the difference (or make a little money), then sell the property as it increased in value.

Well, the situation has changed pretty dramatically since then and now interest only loans are much less sought after and tougher to come by. There has been a crack-down on this specific loan product.

The idea is that instead of paying any principal at all on the loans, you'd pay interest only and the balance of the loan would stay the same. So, the previous fixed rate mortgage where you would have a split between principal and interest now only has the interest component. Of course the rate would not be as good as a fixed rate mortgage, but the overall monthly payment would be lower.

You can inquire about these, but understand that the credit requirements assuming that lenders have these available will be quite strict. Mortgage rates in Utah for these types of loans may not be as aggressive as they were a few years ago considering the recent financial climate.

Adjustable Rate Mortgages

2009-08-17T14:27:00.000-07:00

Adjustable Rate Mortgages are also known as ARMs (their acronym). In the industry, you'll most likely hear the term ARM instead of adjustable or variable rate mortgages. The idea behind this mortgage is that the rate will fluctuate up or down based on some other bank rate or index.

There are a few different indexes on which the ARM can be based. I'll use as an example the Libor which is the London Interbank Rate or the rate banks charge each other for the exchange of money i.e. banks loaning money to each other. Seems a little crazy to think about.

So, if you are in an ARM mortgage, your rate (and payment) will fluctuate from month to month usually depending on the increase or decrease of the Libor (in this example). Now, your rate isn't a mirror of the Libor, but it is typically a couple of percentage points higher than the Libor. For instance, if the Libor was 3.5%, you'd most likely have an interest rate at 5.5%.

There are a few safeguards built into the ARM to protect you the borrower from having to front a lot of money from month to month assuming a large jump in the Libor rate. Your rate has limits on how fast it can increase (as well as decrease). It also has a max rate that no matter how high the Libor goes, your rate is limited on how much it can increase to.

All of these rates are a part of your rate quote and should be investigated further with a qualified loan officer who can explain the options with any ARM including what happens in 2 years or 5 years, or 10 years, if there is a balloon payment due, refinance options, etc.

Fixed Rate Mortgages in Utah

2009-08-17T14:21:00.000-07:00

There isn't a huge difference between fixed rate mortgages in Utah vs. anywhere else in the country. The lenders all still base their rates on the Fed rate which is nationwide, even worldwide.

The fixed rate mortgage is your typical mortgage, usually a 15 or 30 year mortgage in which the rate doesn't change. This means that for the life of the loan, your mortgage rate stays at whatever percent.

The has some benefits because your rate is basically guaranteed for the life of the loan. You can refinance your mortgage to a lower rate at a future date when the rate is lowered. This too, has its drawbacks, however. When you begin to pay on a loan, let's say a 30 year loan with a $2000 monthly mortgage payment.

Of this $2000 monthly mortgage payment, the majority of this payment goes to pay interest and the smaller percentage of this payment actually pays down principal. As this is done on a sliding scale, it actually takes about 22 years before you are paying the same amount to interest as you are to principal.

So, before you jump on a refinance just because the rates are lower, you should calculate the overall interest you'll pay on the loan if you keep paying on your existing mortgage vs. refinance to a "lower" rate. The rate may be lower, but it won't matter if you are paying more interest in the long run.

If you refinance for another 30 years and you've already been paying for say 8 years, you are basically starting over with your interest on the higher end of that sliding scale... just something to think about.

Don't get me wrong, I'm not trying to talk you out of refinancing to a lower rate, especially if you can increase your monthly cash flow by doing this. However, most people aren't disciplined enough to take the savings and put into other investments that actually generate cash. They simply have a couple hundred of extra dollars a month that can now be spent (and usually is).

Loan Officers in Utah

2009-08-17T14:09:00.000-07:00

Utah is a state that requires the loan officer you work with to be licensed. This doesn't mean that the loan officer you work with would be honest, loyal, trustworthy, etc...

Loan officers are required to complete a certain amount of training before they can sit for the official licensing test. This doesn't include employees of your local bank, however as they are not required to be licensed by the state. Just an FYI

However, the loan officer or mortgage office you work with should have a good idea about what mortgage or loan products are available. If you are presented with only one option without having explained your situation, you know you're in trouble because your loan officer probably doesn't know that much about the mortgage products he or she has available.

Don't worry too much about this, but use the information on this site and other sites to give you a basic idea about mortgages so that you will be more informed about what products are available so you can better evaluate the skills of the individual you'll be working with.

If you only know a little about mortgage products, but know more than your loan officer, time for a new loan officer. Also, if your situation is a bit more unique or requires special consideration for some reason, you ought to make sure you have a few options and know what each option represents as far as initial costs and long term overall costs.

This will be an important step when considering which mortgage product to go with. The articles on this and other sites should also help you keep your Utah mortgage rate as low as possible.