Kentucky Mortgage

Getting a Kentucky Mortgage

Kentucky offers a mix of rural and urban areas. It also has a diverse landscape with meadows, mountains, plateaus, valleys, hills, and plains. The main metropolitan areas of Kentucky are Lexington and Louisville. Kentucky has a lower than national average cost of living, so owning a home there is quite affordable.

What types of mortgage loans exist?

The two main types of mortgage loans are fixed-rate mortgages and adjustable-rate mortgages (ARMs). Interest rates on fixed-rate loans do not change over time. This means that monthly mortgage payments will not change for the lifetime of the loan, regardless of market changes. These loans usually last for 30 years, but are also available as 15 year loans, which have higher monthly payments. The security of an unchanging loan rate, however, comes at a price. The interest rates on these loans often start out higher than those of the second type of mortgage, ARMs.

Interest rates on ARMs fluctuate with interest rates on the open market. This means that an ARM interest rate is generally lower at the beginning of this type of loan than it is for the fixed-rate loan. Also, an ARM interest rate may decrease, though this may not be likely. Delayed Adjustable-rate Mortgages are ARMs with a period of fixed mortgage rates. These mortgages keep a fixed rate for a specified amount of time, usually 3, 5, 7 or 10 years. Then, they readjust their rates annually. These have slightly higher mortgage rates than ARMs, but are good for buyers who plan on moving after a number of years.

What are average mortgage rates in Kentucky?

As of June 2006 in the Lexington area, an average 30 year fixed-rate mortgage has an APR of 6.38, while a 15 year fixed-rate has an APR of 6.2. Delayed Adjustable-rate Mortgages in Lexington have slightly higher averages. A 3/1 ARM (3 years fixed- rate) has 7.34 APR, 5/1 (5 year fixed-rate) has 7.08 APR, 7/1 (7 year fixed-rate) has 6.96 APR, and 10/1 (10 year fixed-rate) has 6.8 APR. The Louisville region’s rates are similar but just slightly different: 30 year and 15 year fixed-rate loans are 6.39 and 6.18, respectively. Delayed Adjustable-rate Mortgages are 3/1 at 7.33 APR, 5/1 at 7.07 APR, 7/1 at 6.96 APR, and 10/1 at 6.8 APR.

How do I choose which mortgage rate is best for me?

The longer the mortgage loan, the lower the monthly payments will be. Your income is a major factor in determining the length of time of the loan. Also, the length of time you will live at a particular home is another factor to consider. If you are planning on staying in the house you are buying for a very long period of time, consider longer mortgages. If you want to move relatively soon, choose a Delayed Adjustable Mortgage.

Credit Score and other concerns

Your mortgage rate will be calculated based on your credit score. Kentucky’s average credit score is 677. After you know where your credit score falls, you can calculate what your mortgage loan rate might be. Also, when choosing a mortgage loan, remember that there are more costs besides just the mortgage rate. Consider the closing costs and application fees in addition to the mortgage rate to determine what the total cost of the loan will be.