Special Payment Options For Mortgages In California by Melissa Kellett

Having such a great offer of mortgage loans in California, it is almost outrageous not to take advantage of so many different loan options. The great differences are in the payment options, as we shall see in detail, and we shall explain the reasons for the special conditions in this state.

First, A Great Truth

It is no surprise that prices are higher in California than the rest of the country. As a consequence of this, as well as the fact that salaries are not up to scale with the price of homes, the percentage of homeowners is around 56%, against nearly 70% in the rest of the country. The compensation: make things easier for people to purchase their homes.

Pre-Approval Letter

Another thing that makes things easier is a pre-approval letter. This makes the complex process of searching and finding an adequate home a lot easier. Pre-approval is not the same as pre-qualifying. The pre-qualification is hardly a process. It is the same as saying, "Ok, the guy is good to go", but it is no document at all.

A Proper Document

The pre-approval letter is a document by the lender that states that a loan has already been approved, prior to the purchase, in order to gain time when the borrower finds a house to his liking. It also states the amount of cash to be transferred at the time of closing the deal, which Californian realtors like and appreciate.

A pre-approval means that a formal application has been made and the applicant has passed the credit check and necessary observation of income and banking standings. Consequently, the lender issues a letter to document the decision.

Now, The Payment Options

There is a type of mortgage called Pay Option ARM refinance home loan available. There is an increasing amount of mortgagers who are inclined to this option, according to the observation of some on-line sources. It is a family of options within a basic adjustable rate mortgage loan.

The Options Are

15-year payment: The borrower pays off the mortgage and builds equity faster, as well as saving thousands of dollars on interest.

30-year payment: This option allows you to maintain a regularly low monthly payment throughout the 30 years of the arranged mortgage.

A minimum monthly payment during the first year at a 1% interest rate. The rest, completing the 5% full rate, passes on to the principal, left to be paid at the end of the loan.

Interest only payment: At a 5% rate, leaving the principal to be paid at the end.

Who Can Make The Best Of It

Considering that in California the rate of appreciation is still steady, compared to one year back, it makes this type of mortgage adequate for most borrowers. The two categories mostly benefited from the Pay Option ARM mortgage loan are the self-employed, who have fluctuating income and may need to resort to the minimum 1% payment during a certain period, and season workers, like contractors.

The Fluctuation

During the spring and summer months, contractors will be working full blast, whereas in the fall and winter, the weather is not so favorable and business will be slackening. With this perspective, contractors will be able to make good use of the payment options, allowing them to make a minimum payment when things are not too good.

As it usually happens, necessity brings about wit. And when things are losing equilibrium, there is always an invention to put things right, like the Pay Option ARM Mortgage loan.