Mortgage Information

Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which is the best for your situation. You probably won't qualify for all of them. In fact, you may only qualify for one. But if you do qualify for more than one, you may save yourself money (and worry) in the long run if you do your homework before signing on the dotted line.

Fixed Rate Mortgages

Consider a fixed rate mortgage if either of the following describes you:

• You plan on living in your new home for many years, and/or
• You are not a risk-taker and prefer the stability of knowing how much your payment will be each month.

Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be what works best for you.

This may not always be the best choice, however. If interest rates are very high at the time you take out your loan, with a fixed rate mortgage you'll be stuck with that high interest for the life of the loan (unless you choose to refinance). Conversely, if interest rates are very low, you'll come out the winner with interest rates that will stay low no matter how high interest rates go in the future.

Adjustable-Rate Mortgages (ARMs)

If you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the right loan. You might also choose this type of loan if your planned ownership of the property is short-term or if you expect your income to increase to cover any potential rise in the interest rate.

Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.

Every  ARM interest rate istied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the index used plus a margin, generally of two to three percent.

Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you'll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.

Government Loans

Another mortgage option available to some people is a government sponsored loan, providing that you meet the qualifications for these loans. 

• VA Loans: Veterans may qualify for a loan from the Veterans Administration. There is a limit on the amount you can borrow, so consult a mortgage broker. The advantage of VA loans are 100% financing and no mortgage insurance.
• FHA Loans: The Federal Housing Association offers loans as well. These loans allow very low down payment options and recently have help in the credit crisis by allow borrowers to borrow more than the home is even worth. Call our office for details. Look for the phrase "FHA approved" when looking at ads for homes.

If all this sounds confusing and you would like a knowledgable loan officer to explain your options to you during a free prequalification session please contact us.