Orlando Real Estate

A:  At any one time, no one knows for sure where rates are headed. Beyond public policies put in place by the Federal Reserve Board, there are no laws that govern mortgage rates. Historically, usury laws were used to prevent lenders from charging sky-high interest rates when lending money. But in some states where there are usury laws, banks, thrifts and a number of other financial institutions are exempt from the law.

Today, interest rates are governed solely by the financial markets and by Federal Reserve Board action, neither of which can be predicted with absolute certainty.

Resources:
* "Consumer's Guide to Mortgage Lock-Ins" from the Federal Citizen Information Center (800) 333-4636; pueblo.gsa.gov.

Whether to opt for a fixed or adjustable rate mortgage is a matter of personal choice. The first route offers stable payments; the second offers lower initial payments.

Another consideration is the length of time a buyer plans to own the home. If you're planning on moving within three or four years, an ARM makes sense even if rates do nothing but rise during that period of time.

A: Price discounts and interest rate buydowns are common incentives offered by new-home builders trying to overcome slow sales.

Buydowns are a financing technique used to reduce the monthly payment for the borrower during the initial years of the loan. Under some buydown plans, a residential developer, builder or the seller will make subsidy payments (in the form of points) to the lender that "buy down," or lower, the effective interest rate paid by the home buyer.

State agencies often offer lower rate loans. But to qualify, borrowers usually must be a first-time home buyer and meet income limits based on the median income level of their county.

A:  The interest rate on an owner-carry loan is negotiable. Ask your agent to check with a lender or mortgage broker to determine the current rate on institutional first (or second) loans.

Seller financing typically costs less than conventional financing because sellers don't charge loan fees (points). Interest rates on an owner-carried loan will also be influenced by current Treasury bill and certificate of deposit rates. Sellers usually aren't willing to carry a loan for a lower return than they would earn if their money was invested elsewhere.

A: Some lenders are willing to negotiate on both the loan rate and the number of points but this isn't typical among established lenders who set their rates like large corporations set the prices on their goods. Nevertheless, it pays to shop around for loan rates and know the market before you go in to talk to a lender. You should always look at the combination of interest rate and points and get the best deal possible.

The interest rate is much more open to negotiation on purchases that involve seller financing. These usually are based on market rates but some flexibility exists when negotiating such a deal.

When shopping for rates, look for published rates in local newspapers or check the growing number of Internet sites that publish such information.

A: Adjustable-rate mortgages go up and down with interest rates, based on several esoteric money market indexes which cause the cost of funds for lenders to vary. Several popular indexes include Treasury Securities, Cost of Funds, Certificates of Deposit, and Libor (London inter-bank offering rate). Most big city newspapers publish ARM index rates.

The interest rate and payment adjustments do not always coincide. There is usually a lag. There are a variety of consumer protections built into these loans. But consumers need to beware of advertising and other claims made by lenders.

Resources: * For more information, consult the "Consumer Handbook on Adjustable-Rate Mortgages," available on the HUD website, www.hud.gov; provided by the Federal Reserve, www.federalreserve.gov.

A:  The Annual Percentage Rate (APR) is the relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the federal Truth-in-Lending Act, according to Charles O. Stapleton III, Thomas Moran and Martha R. Williams, authors of "Real Estate Principles," 5th Ed., Dearborn Financial Publishing, Chicago; 2001.

The APR is the actual yearly interest rate paid by the borrower, figuring in the points charged to initiate the loan and other costs. The APR discloses the real cost of borrowing by adding on the points and by factoring in the assumption that the points will be paid off incrementally over the term of the loan. The APR is usually about 0.5 percent higher than the note rate.

A lock-in given at the time of application is useful because it may take the lender several weeks or longer to prepare a loan application (though automated loan practices are cutting this time dramatically).

However, some lenders require borrowers to pay lock-in fees to assure particular rates and terms. Be sure to check that the rates and points are guaranteed and that your lock-in period is long enough. If your lock-in expires, most lenders will offer the loan based on the prevailing interest rate and points.

Lenders may have preprinted forms that set out the exact terms of the lock-in agreement. Others may only make an oral lock-in promise on the telephone or at the time of application.

Resources:
* "A Consumer's Guide to Mortgage Lock-Ins," Federal Citizen Information Center (800) 333-4636; pueblo.gsa.gov.