Choosing A Mortgage Program
Your home is likely the largest investment you will ever make. Shouldn't you be sure that you've secured the best possible financing for your investment? When choosing a mortgage program, it is important to understand your current financial situation, as well as what you can afford. It is also important to consider what you feel comfortable paying each month as well as your acceptable level of risk when choosing a mortgage program.
Generally, most home loans fall into one of two categories:
Fixed-Rate Mortgages
With a fixed-rate mortgage, your interest rate will never change throughout the entire life of the loan. A fixed-rate mortgage provides the security of knowing that your monthly payment (principal and interest) will never change regardless of market fluctuations. A fixed-rate mortgage is recommended for homebuyers who are buying their home while interest rates are low and plan on staying in the home for a long time.
Adjustable Rate Mortgages (ARMs)
ARMs have interest rates that are fixed initially and then adjust to current market conditions. An ARM typically has a lower interest rate during the initial fixed period than fixed-rate loans but will adjust accordingly. If you plan on only staying in your home for a short period, you may want to take advantage of the lower rates and lower initial payments that an ARM offers.
Other loan options to consider:
An FHA loan is a loan insured against default by the Federal Housing Administration and offers many advantages, especially to first-time homebuyers. Because the loan is insured by the federal government, lenders are more willing to lend to those with less than perfect credit and are more flexible in regards to income and down payment.
Jumbo Loans
A jumbo loan is a loan above the maximum loan amount established by Fannie Mae and Freddie Mac. ($417,000)