Choosing the Mortgage That''s Right for You Starts with Understanding the Options
By Keith Loria
When it comes to choosing a mortgage, it's more important than ever for prospective buyers or current owners looking to refinance to understand the wide range of mortgage loans available. Whether you're in the market for a home mortgage, looking to refinance or jump on the green bandwagon with energy efficient upgrades, there are a number of different home mortgage loans available.
While the process can quickly become overwhelming, the following list of mortgage loans will satisfy anyone's unique need or situation.
Fixed-rate mortgages are the most common mortgages since the rates are stable for the life of the loan, taking all the guesswork out of the equation. Not only will borrowers know their exact monthly payment throughout the life of the loan, they can also be sure that nothing will change. The most popular fixed-rate mortgages are 30- and 15-year terms.
Adjustable-rate mortgages (ARMs) start with low rates for a specified time and then fluctuate periodically based on the market conditions. While the initial rates are significantly lower than fixed-rate mortgages, borrowers need to be prepared for the possibility of increased mortgage payments later on. Because of the risk involved, ARMs are typically ideal for borrowers who plan to stay in their home only for a short time.
Two-step mortgages start out as an adjustable-rate mortgage that has the same interest rate for part of the mortgage and a different rate for the rest of the mortgage. The interest rate changes or adjusts in accordance to the rates of the current market. The borrower, on the other hand, might have the option of making the choice between a variable interest rate or a fixed-interest rate at the adjustment date. When going with a two-step mortgage, borrowers are taking the risk of the interest rate of the mortgage adjusting upward after the expiration of the fixed-interest rate period. Many borrowers who take advantage of the two-step mortgage plan on refinancing or moving out of the home before the period ends.
FHA mortgages are home loans insured by the Federal Housing Administration and are designed to help borrowers who might not otherwise be able to get a loan. FHA mortgages have become more popular among first-time homebuyers due to their lower down payments, flexible mortgage requirements and consistent rates throughout the entire term.
For those who need larger loans than the conforming loan limits set by Fannie Mae and Freddie Mac, jumbo mortgages are the way to go. For most of the country, the conforming loan limit is set to $417,000, while high cost areas have conforming loan limits up to $729,750. Jumbo loans are a higher risk to lenders and usually have higher mortgage rates and stricter mortgage criteria, including higher down payments and higher credit requirements.
There are also special mortgages for veterans, those in the military, first-time buyers and even doctors, so always check with your local and state mortgage programs. In addition, examine all community service and housing agency mortgages and mortgage assistance programs.
For more information about finding the mortgage that's right for you, contact our office today.