Washington properties financing

The State Housing Finance Commission of Washington is on a target to increase the percentage of home ownership in the city. According to the 2004 census, nationwide statistics suggest that Washington stands 43^rd of the 50 states ranked for home ownership. The state being a very big one, these results are far from being satisfactory.

The main reasons for such low home equity participations can be :

The soaring home prices in Washington

Presence of many military communities in the state.

80% of the population being the median income group workers, they think that the federal schemes are meant for only the very poor people.

So, the Federal Government in consensus with the private financial agencies is on a frantic exercise to increase the homeownership percentage.

The current house key interest rates for the loans disbursed by the SHFC are as follows:

Fixed interest loans for a term of 30 years:

6.00% (arbitration of 2points depending on the prevailing interest rates).

6.25% (arbitration of 1 point depending on the prevailing interest rates).

6.50% (with 0 point arbitration).

Fixed interest loans for a term of 40 years and interest only:

6.25% (arbitration of 2 points depending on the prevailing interest rates).

6.50% (arbitration of 1 point depending on the prevailing interest rates).

6.75% (with 0 point arbitration).

But these are only the interest rates which are charged as a consideration of the loan disbursed. Whenever, one applies for a loan, the interest calculators only calculate these figures. If one concludes that this is the only cost of the loan, then he/she is sure to be ditched. The actual cost of the loan can be arrived by calculating the Annual Percentage Rate (APR) of the loan which includes all the charges starting from the origination fees to the closing costs.

Actually APR is the real charge a loan carries and if one has to take up a loan he has to compare the effective APRs instead of comparing the interest rates. The interest rates only specify the percentage of the consideration which the loan seeker has to reimburse to the lender for the purchasing power loss which the lender has to undergo by extending a loan to the loan seeker.

On the other hand, APR includes:

The origination fee which is charged for developing your loan request by the financial company. The industry standard is some 1% of the whole deal.

Lenders fee or the processing fee for working upon your loan request.

The discount points which you wish to buy for lowering your interest rate.

Flipping charges in case you are refinancing your previous loan for a lower charging loan. These usually amount to 2% to the whole deal and you are advised to flip your loan only if you are confident of covering all these charges within a stipulated period of time.

The interest rate and The closing costs for approving your loan request and crediting the amount into your account.

Irrespective of whether you take up a loan with the SHFC or any other private financial institution, they all emphasize on the fact of low interest rates and down-payment assistance but they will not advise the cost of such facilities.

Low interest rates imply a high cost of discount points which you need to buy at the outset of availing a loan for buying a home. The best thing in this case is to arrive at a balance of the cost of discount points and the interest rates so that you attain the least possible APR.

In a drive to increase the home ownership, nowadays, the down payment assistance is extended to loan seekers who wish to buy a new house. Sometimes, even 3% down payment is accepted to avail the home loans. This is a welcome program for it helps you to avail the tax advantage. Actually, whenever you take up a loan, the interest payments are deducted from the taxable income and thus your APR is reduced to that extent of your tax advantage. For example, if you have taken up a loan with i% interest rate, the real APR would be i(1-t)%. So, the more loans you take up, the better is the chance of your availing the income tax deductions. Further, after repaying some of the loan amount also, when you achieve an equity position in your property, you can further take up another loan with your home equity as a collateral security. This would reduce your tax payments further. But then, a balance of tax deductions and interest payments has to be carefully calculated before risking your property for a foreclosure.

Keeping these two important points in mind, you have to negotiate with your lender regarding the other charges like the origination fee, lenders fee and the closing costs. You should be very careful that he does not ditch you by escalating the APR through wrong calculations.

Its better that you go shopping for home loans before you fix up your lender. Careful selection of your lender is a pre-requisite for availing the cheapest loan. Your lender should not be predatory, in the sense that he should be clean and clear about his charges, terms of loan; reasonable in his rates, should not coerce you in any way for taking up a loan from him, fix up the instalments according to your repayment capacity, explain all the hidden clauses in the agreement before entering into a loan contract. If you find any of the lenders doing contrary to these above said practises, you can estimate him to be predatory and your finance is not safe with him. So be careful of such dubious persons for a safe bet.

After doing all the market study, compare the APRs of different lenders and then decide your convenience also before entering into a loan transaction. Real APR inscribes all these estimates and the one with the best option has to be selected for a happy home finance.

So before entering into a loan transaction. Real APR inscribes all these estimates and the one with the best option has to be selected for a happy home finance.

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