California Mortgage 101
Our goal is to be one of the best sources of information on the internet about California Mortgages.
A California mortgage is a type of loan one takes for purchasing houses, wherein the borrower gives the creditor a lien on the property that is used as collateral for the repayment of the loan.
There is plenty to know when it comes to understanding the California mortgage process, and on this website you will find comprehensive and up to date articles dealing with the many different types of financing available, loan options, and much more.
We know that your time is valuable and we want to be your one-stop information site. So, feel free to bookmark and visit us again and again. We'll continue to add new content to our site on a regular basis.
Here's a brief sampling of what you'll learn:
- Why the term "Jumbo Mortgage" has less meaning in California
- What your options are in refinance mortgages
- Why an ARM is sometimes better than a fixed rate mortgage
- The advantages of working with a local California mortgage company
- Programs for first-time home buyers in California
- What else makes buying a home in California a unique experience
- And much more!
There are different types of mortgages and no single one is deemed as the 'best' because it depends a lot on your own personal and financial situation.
In general though, there are two different kinds of mortgages — the fixed rate mortgage (FRM) and the adjustable rate mortgage (ARM).
Is a Fixed-Rate California Mortgage Loan for You?
A fixed-rate mortgage is recommended for those who won't be moving for the next 20-30 years. When you choose this type of California mortgage financing, you're assured that the interest rates will not change for the rest of the loan period. The term/period of the loan is usually 30 years, but 15- to 20-year term loans are also available. Fixed rate mortgages usually have higher interest rates than the ARM, but they protect you from the dangers of rising interest rates. The downside of course is that you can end up with higher rates should interest rates fall.
If you want to reduce your interest rates, you should go for shorter term plans, like the 15-year term instead of the 30-year term plan. This can lower your interest rates to a quarter or a half, but remember that monthly payments will be higher since the term is shorter.
Is an Adjustable Rate California Mortgage Loan for You?
ARMs are usually recommended to those who are not planning to stay long in a particular place. The main advantage of ARMs is that with their lower initial rates, you can qualify for a larger loan and begin with smaller payments instead of higher fixed rates. However, ARMs can be volatile as sometimes interest rates are up... sometimes down. With an ARM, you should always be ready just in case rates go two notches up. On the other hand, your monthly payments get smaller when rates drop.
Usually, ARMs have limits on how high they can adjust during a particular adjustment period. This offers borrowers some sort of protection from extreme market changes.
California Mortgage Types – Do You Need a Little Bit of Both?
At a quick glance, FRMs appeal to those who prefer knowing how much they should be paying in advance and are not 'adventurous' when it comes to fluctuating interest rates. ARMs, on the other hand, appeal to those who do not intend to stay in the same house anyway and prefer to make smaller payments at the start of the loan. However, if you want the best of both worlds, it is important to note that many 'variations' are being offered by finance institutions and private lenders today.
For instance, there is the hybrid loan, wherein the borrower starts off with an FRM mortgage loan for the first 7 to 10 years and then switches to an ARM for the remainder of the mortgage term. There is also the interest-only mortgage loan, wherein the borrower only pays the interest rates of the loan for 3, 5, 7 or 10 years and then the loan is fully amortized.
There are plenty of California mortgage loan types that you should look into before you choose which one is best for you. Be sure you discuss this fully with your California mortgage broker.