Trying to decide on what type of mortgage loan can be an overwhelming task. It isn't easy to sort through all the possibilities and know which benefits will best suit your needs.
It is wise to know the types of loans that are available and then choose the one that works best for you and the budget you have for purchasing a home. For example, there is Fixed-Rate mortgage loans that offer an interest rate that does not change for the life of the loan. If you plan on staying in a new home for an extended period of time, a Fixed-Rate mortgage may be the way to go. These loans are available for 30, 20 or 15 years. Because there is no risk that changing marketing conditions will affect your monthly payment, the 30-year Fixed Rate mortgage is considered to be the most conservation.
On the other hand, if you are not planning on living in a home for more than a couple of years, an Adjustable Rate mortgage may be ideal because the interest rate is adjusted periodically based on an index. There are 1, 3 and 5- year Adjustable rate mortgages. These loans are considered quite risky because when the mortgage is adjusted, the monthly payment could rise substantially. These loans are also known as a Variable Rate mortgage.
If your budget is limited but expected to improve, you can consider a Balloon mortgage, which is like a Fixed-Rate mortgage set for a number of years and then must be paid off in full in a single "balloon" payment. It is a popular program designed for those who expect to sell or refinance their property with a set period of time. This loan is also ideal for workers who are temporarily relocated and don't plan on living in a home for more than five years. In some cases, the borrower may request a Conditional Right to Reset that will extend the fixed period.
There is also the Two-Step mortgage that has a fixed interest rate for the first seven years and is then adjusted one time for the balance of the loan period. This type of loan should only be considered if you know that you can afford the post-adjustment monthly payment.
A Conforming loan is for those planning on investing $417,000.00 or more, and a Jumbo loan is similar, with limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation Interest rates on Jumbo loans are usually higher because they are funded by the above-mentioned agencies.
Of course, a lender will always be available to help you with your concerns and to answer your questions. Keeping yourself open to options, understanding your financial positioning and evaluating your individual needs can help you to invest your money the right way. By doing this, you can build your own investments into larger profits over a period of time.
ABOUT THE AUTHOR:
Richard sells real estate in the San Gabriel Valley which is about 12 miles South of Los Angeles. For more information, visit his website at http://www.westsangabrielvalleyrealestate.com
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