What type of mortgage suits me best?
March 11, 2009 at 7:19 pm Leave a comment
When you start to shop around for a mortgage program, it’s important to take into consideration:
· your ability to qualify for the loan amount,
· how long you plan to live in the home,
· whether your income is stable or rising,
· the possibility of significant interest rate changes, and
· the amount of up-front costs and whether you can comfortably afford your monthly mortgage payment.
Your monthly mortgage payment will generally include a principal and interest payment; an amount to cover your real estate taxes and homeowners insurance; and possibly an amount to cover other costs like condominium dues and mortgage insurance. Mortgages generally fall into one of two categories — fixed-rate and nonfixed-rate.
Fixed-rate mortgages feature a nonchanging interest rate. The principal and interest portion of the monthly mortgage payment do not change, although real estate taxes and homeowners insurance costs may rise from year to year, resulting in a higher monthly payment.
· Advantages: Fixed-rate mortgages are ideal for borrowers whose income is not rising rapidly and who want the comfort of knowing the principal and interest portion of the mortgage payment will not change.
· Disadvantages: A fixed-rate mortgage typically has a higher initial interest rate than a nonfixed-rate mortgage.
Nonfixed-rate mortgages are designed for borrowers who are comfortable with their ability to handle payment increases. Because the borrower assumes some of the interest-rate risk that the lender normally assumes on a fixed-rate mortgage, the borrower receives a lower initial interest rate.
· Advantages: A lower interest rate means a lower monthly payment.
· Disadvantages: Beyond increasing costs for taxes and homeowners insurance, the interest portion of the monthly payment also increases. The point at which the payment can be changed varies by the program chosen. It can range from one month to more than five years. Typically, the shorter the period before a change can occur, the lower the initial interest rate.
When you’re ready to apply for a loan, we can help you review the loan options that are available and determine the type that best suits your needs. Give us a call or drop a line.
Contact mortgage help today by visiting mortgagehelp.com or call our offices at:
888.684.9111
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