Given the competitive nature of the mortgage business, banks and other lending institutions are offering a variety of mortgage products that have made home buying simpler. Mortgages come with either fixed or variable interest rates. Fixed rates are typically one or two percentage points higher than variable rates, but the interest rate remains constant throughout the life of the loan. Variable or adjustable rate mortgages (ARMs) increase and decrease with the prevailing interest rates. These can be great bargains in good economic times, but can become expensive if interest rates jump. Variable rate mortgages are best for homeowners who expect interest rates to decline, plan to stay in their home five years or less, or are confident their income will increase in the years ahead. To protect homeowners, variable rate loans have “caps” that limit how much the interest rate can increase.
Metro Milwaukee Area by the Numbers
Buying a Home
Many lenders have on-line worksheets that can help you determine how much house you can afford. Generally speaking, house payments – including insurance and property taxes – should not exceed 28 percent of the household’s gross monthly income (income before taxes). Total household debt (including credit cards, mortgage, auto and other loans) should not exceed 36 percent of monthly income. Homeowners who cannot afford to make a down payment equal to at least 20 percent of the sales price will likely have to purchase private mortgage insurance, which can add $50 to more than $200 to the monthly payment. The above information is meant only as a general guide. Homeowners should consult a Realtor or a mortgage banker before making a final determination on what they can afford.
Milwaukee is fortunate in that it has many local lenders who are knowledgeable about the southeastern Wisconsin market and can provide valuable assistance with a mortgage, including:
Associated Bank www.associatedbank.com
The Equitable Bank www.theequitablebank.com
UW Credit Union www.uwcu.org/homeloans
Waukesha State Bank www.waukeshabank.com