Guide to Refinance, Mortgage,
& Home Equity Loans in
South Sacramento, California (CA)

South Sacramento homeowners have a lot of advantages over homeowners in other parts of the country. Housing is reasonably affordable and the cost of living is, too, when you compare it to other California cities. You have got that beautiful Mediterranean climate where the sun shines most of the time. You have the advantages of a large city, with colleges, medical centers, cultural activities, concerts and special events, along with the advantages of living in a neighborhood with great people who know and care about each other.

Whether you are buying a home in South Sacramento, refinancing you current home or getting a home equity loan, you will need to know about the different types of mortgages available these days, so that you can decide which is best for you.

Fixed Rate Loans: Most home loans are fixed rate loans. When interest rates are low, they are a great buy. Fixed rate loans are good if you plan to stay in your home for a long time and especially if you like the predictability of having the same house payment every month. You can use a fixed rate loan for any type of mortgage, but home equity loans are nearly always fixed rate.

Adjustable Rate Mortgage: The interest rate on adjustable rate mortgages changes at specific intervals. Since most of your house payment is interest, your payment changes whenever the interest rate does. Most ARMs have a lower initial interest rate than fixed rate loans, making them ideal if you plan on selling your home within five or ten years. You can use an ARM for either a home purchase or a refinance.

All other types of home loans are variations of adjustable rate mortgages.

Interest Only Mortgage: During the first five to ten years of an interest only mortgage, interest is the only thing you have to pay. These are adjustable rate mortgages, and the interest rate will probably be higher than with a traditional ARM. An interest only mortgage will let you buy the house you want now, rather than waiting until your income goes up. However, you need to be aware the your house payment will increase radically when you start to pay on the principle; the assumption is that your income will have increased enough by then that you can afford it. Even though you are not paying on the principal during those initial years, you are living in your own home rather than a rental. Interest only mortgages are typically only available for home purchases.

Option Mortgage:

This is another mortgage for younger buyers or those who expect their income to go up within a few years. Each month you choose the payment you want to make from among four options: an interest only payment, a 15 year amortized payment, a 30 year amortized payment or a minimum payment. The danger with option mortgages is that the minimum payment is less than the interest payment, and the unpaid interest is added to your loan when you choose that option. You can get into negative amortization that way, which means that your home loan gets bigger instead of smaller, and you could end up owing more on the home than it’s worth.

Jumbo Loans:

Just like it sounds, these are big loans over $400,000 in most areas. They are ARMs and are used for luxury homes, which are high risk because they do not sell as fast as regular homes. Because of the risk, the interest rate is also higher. Whether you are refinancing or buying, if you need to borrow a large amount of money, you will need a jumbo loan.

Balloon Loans:

Balloon loans are often used for new construction. The interest rate and payments are very low, but at the end of the loan term, usually five years, the entire amount remaining is due. People take out balloon loans planning to sell or refinance before the loan matures.

The other thing you will need in order to get a home loan in South Sacramento is a lender. You can find one by filling out the form at the bottom of this page.


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