5 Mortgage Options For
Savvy Consumers
If you are in the process of buying a home or are just now beginning your search, the type of home that you select will depend largely on what you can afford to pay for it. Depending on the mortgage option selected, you could see mortgage payment differences of several hundreds of dollars per month. Doing adequate research is essential if you are to come out ahead in the home financing game. Please keep reading for five mortgage options for your consideration.
Fixed Rate Mortgages – The most popular and widely accepted home financing loan obtainable. The advantages of this type of mortgage are clear: rates are fixed throughout the entire term of the loan which is typically runs for 30 years. Other term packages offered by some mortgage lenders are for 15, 20, 25, and even up to 40 years. In California, 50 year loans are now available as rising housing costs mean that homebuyers must look at ways to spread their costs out over a longer period of time.
Adjustable Rate Mortgages – Purchasing a home has gotten easier these days as variable rate mortgages or ARMs provide an affordable option for homebuyers. Interest rates on and adjustable rate mortgage can be as much as one percent point lower than what you would pay for a fixed rate loan. In most cases, rates are set for the first few years of the loan and then adjusted periodically thereafter as determined by the federal consumer price index.
Introductory Rate ARMs – Home loans are also available as Introductory Rate ARMs. With these types of loans, the rate is set low for a specified period of time. This allows homeowners like you to get a bigger home for the money. One caution: the rate can surge once the introductory period is over -- make certain you understand what this loan entails before agreeing to this type of mortgage.
Graduated Payment Mortgage – The GPM is an alternative to the traditional variable rate mortgage. Rates are set for one year and then climb at predetermined amounts in the ensuing years.
Balloon Mortgages – Balloon loans are short term mortgages that have some of the same characteristics as a fixed rate mortgage. In most cases, the interest rate is set fairly low for a specified period of time. At the end of that timeframe the loan has “come due” therefore you will need to refinance the balance of the monies owed.
The loan you choose will depend on the level of risk you are comfortable with as well as your personal credit rating and history. Shop around and compare offers; be careful of pressure tactics pushed by some lenders.