There are many different types of mortgages. It’s important to shop around to find the mortgage that’s right for you. The mortgage rate and length, or term, as well as points are all factors in deciding which mortgage is right for you.
The type of mortgage is also an important part of the decision. Some of the most common mortgages available today include:
Fixed-rate mortgages: Fixed-rate mortgages are stable and offer long-term savings. Because the interest rate never changes, the monthly principal and interest payment never changes either. Your payment could go up a little, however, if property taxes and insurance costs go up. A fixed-rate loan is the most common loan for first-time homebuyers.
Adjustable-rate mortgages: Adjustable-rate mortgages (ARMs) usually start with a lower interest rate, so your monthly payments are lower. This allows you to qualify for a larger mortgage than would be possible with a fixed-rate mortgage. The interest rate on an ARM is adjusted periodically based on an index that reflects changing market interest rates. It’s important to understand all the aspects of ARMs before you make your decision. ARMs are a good choice if you like to take advantage of favorable market conditions and/or expect your income will increase over the life of the loan. Also, if you decide to later refinance into a fixed-rate mortgage, you will incur closing cost expenses.
Balloon/reset mortgages: Balloon/reset mortgages may be a good choice for homebuyers who don’t expect to own their home past the maturity date of the balloon note: 5 or 7 years, for example. At the end of that time, you must sell your house or get a new loan, called a refinance. Expect to pay fees associated with a refinance.
Graduated payment mortgages: With this mortgage, you can start out making lower monthly payments; then over a period of years, your payments go up slowly. When the payments reach a certain amount, they stay fixed at that amount for the rest of the loan. Graduated payment loans are good if you think your annual income will go up.
Interest-Only Mortgages: Instead of paying part of the principal (the loan amount) each month plus interest charges, interest-only loans require that the borrower pay only the interest for the first 5 or 10 years. After that, the borrower must either pay the balance of the loan or start paying both principal and interest monthly for the remaining period, perhaps 20 to 25 years. The potential risks are significant for interest-only loans, especially if the interest rate on the loan increases, and the required payments of both principal and interest are well beyond your ability to pay each month. After the interest only period ends, the monthly payment will be substantially higher than if you had used a traditional 30-year mortgage loan.
Option ARMs: Also called “flex” ARMs, these loans let the borrower decide how much to pay from one month to the next based on a few choices. The options range from making a full monthly payment (what you normally would pay in principal and interest for a traditional mortgage) to a “minimum” payment that does not fully pay for the interest due, but the shortfall is added to your loan balance. If you do not have enough money for your regular monthly payment, you can send in a low payment and not be defaulting on your loan.
Remember to shop around for the best mortgage rates. Contact lenders at banks and credit unions as well as mortgage brokers. Keep in mind that the lowest mortgage rate may not always be the best choice for you. Rates are important, but also consider the overall cost of the loan.
Look at other costs such as loan fees, origination fees, and points. Be sure to ask the lender exactly what he or she is quoting to you. Ask what the annual percentage rate (APR) of the loan is. The APR takes into account the interest rate and fees.
Ask for a “good-faith estimate” (GFE) in writing from each lender that you work with so you understand all of the costs and you can compare lenders। Required by law to be given to you by the lender after you submit an application, a GFE is a written statement itemizing the approximate costs and fees for the mortgage.
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The type of mortgage is also an important part of the decision. Some of the most common mortgages available today include:
Fixed-rate mortgages: Fixed-rate mortgages are stable and offer long-term savings. Because the interest rate never changes, the monthly principal and interest payment never changes either. Your payment could go up a little, however, if property taxes and insurance costs go up. A fixed-rate loan is the most common loan for first-time homebuyers.
Adjustable-rate mortgages: Adjustable-rate mortgages (ARMs) usually start with a lower interest rate, so your monthly payments are lower. This allows you to qualify for a larger mortgage than would be possible with a fixed-rate mortgage. The interest rate on an ARM is adjusted periodically based on an index that reflects changing market interest rates. It’s important to understand all the aspects of ARMs before you make your decision. ARMs are a good choice if you like to take advantage of favorable market conditions and/or expect your income will increase over the life of the loan. Also, if you decide to later refinance into a fixed-rate mortgage, you will incur closing cost expenses.
Balloon/reset mortgages: Balloon/reset mortgages may be a good choice for homebuyers who don’t expect to own their home past the maturity date of the balloon note: 5 or 7 years, for example. At the end of that time, you must sell your house or get a new loan, called a refinance. Expect to pay fees associated with a refinance.
Graduated payment mortgages: With this mortgage, you can start out making lower monthly payments; then over a period of years, your payments go up slowly. When the payments reach a certain amount, they stay fixed at that amount for the rest of the loan. Graduated payment loans are good if you think your annual income will go up.
Interest-Only Mortgages: Instead of paying part of the principal (the loan amount) each month plus interest charges, interest-only loans require that the borrower pay only the interest for the first 5 or 10 years. After that, the borrower must either pay the balance of the loan or start paying both principal and interest monthly for the remaining period, perhaps 20 to 25 years. The potential risks are significant for interest-only loans, especially if the interest rate on the loan increases, and the required payments of both principal and interest are well beyond your ability to pay each month. After the interest only period ends, the monthly payment will be substantially higher than if you had used a traditional 30-year mortgage loan.
Option ARMs: Also called “flex” ARMs, these loans let the borrower decide how much to pay from one month to the next based on a few choices. The options range from making a full monthly payment (what you normally would pay in principal and interest for a traditional mortgage) to a “minimum” payment that does not fully pay for the interest due, but the shortfall is added to your loan balance. If you do not have enough money for your regular monthly payment, you can send in a low payment and not be defaulting on your loan.
Remember to shop around for the best mortgage rates. Contact lenders at banks and credit unions as well as mortgage brokers. Keep in mind that the lowest mortgage rate may not always be the best choice for you. Rates are important, but also consider the overall cost of the loan.
Look at other costs such as loan fees, origination fees, and points. Be sure to ask the lender exactly what he or she is quoting to you. Ask what the annual percentage rate (APR) of the loan is. The APR takes into account the interest rate and fees.
Ask for a “good-faith estimate” (GFE) in writing from each lender that you work with so you understand all of the costs and you can compare lenders। Required by law to be given to you by the lender after you submit an application, a GFE is a written statement itemizing the approximate costs and fees for the mortgage.
http://www.hereiaminc.com/
