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Digging The Best Types Of Mortgage Loans
from:There are a confusing number of types of mortgage loans
available to borrowers today. Some borrowers tragically have
signed mortgages in the past containing terms which they did not
understand. Many blame mortgage brokers for misleading
borrowers. However, every consumer needs to be armed with the
information needed to fully understand the proposed mortgage
terms on their own.
Some mortgages have what are called fixed interest rates. You
get an initial interest rate and it never changes during the
course of the loan. If rates decrease and become much lower than
the one you have, then it is always possible to refinance
sometime in the future. A fixed rate is good because it allows
you to budget accurately for your housing expense.
Other mortgages have what are termed adjustable rates. Interest
rates on these loans can go up as market interest rates
increase. Some have built in "teaser rates" which offer a very
low initial payment which greatly increases after a given period
of time. These type mortgages can be very risky. Many borrowers
who selected these loans found out that they could not afford
the new payment after the amount increased. You should ensure
this never happens to you.
Historically, most mortgages had terms of thirty years. After
thirty years of payments a celebration would ensue burning the
paid off mortgage papers. More recently, terms of 40 years or
longer have emerged. Most experts assert that you are better off
sticking with a 30 year term. If possible, it is even better to
seek a 25 or 20 year term assuming you are able to meet the
higher monthly payment amount.
Mortgages vary in terms of how much money you need as a down
payment. In the past, most all mortgages needed 20% down
payments. Some exceptions existed such as the FHA loan program.
For a period in recent history many lenders lowered this
requirement. Some lenders even routinely wrote mortgages with no
money put down by the borrower. This might seem attractive to
you.
However, with no initial equity the loan can become quite risky.
If your home should decline in value, then you could be in a
scenario where your home's value is less than the amount you owe
on your mortgage. You then become essentially trapped in your
home with no escape. Having initial equity is a smarter and
safer choice. Most experts recommend putting down 20% of the
purchase price as your down payment.
Many mortgages have complicated closing fees and "points"
associated with them. These can increase if your credit score is
not acceptable. Ideally, a borrower avoids mortgages with these
types of high fees. All mortgages entail some fees at closing.
When looking for a mortgage compare these fees when shopping
around. Don't just exclusively focus on the interest rate.
Points and fees can make an otherwise attractive loan become
much less desirable.
Pay attention to the different types of mortgage loans. Each
term is important and should be researched and studied. Do not
rely upon others to explain terms to you. There are many free
resources available online which enable you to become a smart
mortgage borrower on your own. Do your research and pay
attention to the fine print. This will ensure you avoid common
mortgage pitfalls.
About the author: Adam Hefner
To find out much more about the best types of mortgage loans for you, visit http://www.MortgageLoans-101.com where you'll find this and much more, including many more useful first time home buyer loans.
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