If the mortgage rate fits

Posted by  on Apr 16, 2009
When shopping for a mortgage, there are important questions to ask yourself as well as the mortgage broker. To start, ask if the mortgage should be the traditional fixed rate mortgage, an adjustable rate mortgage, etc. These are not easy questions to ask, and in fact, no one is expecting an answer right away. But these initial questions will spark the thought process on just what is being looked for, and what type of mortgage will fit for that borrower. Deciding which mortgage is the best is a difficult decision when trying to fulfill all financial needs. There are so many types of home loans and mortgages with different terms, and term length, it seems nearly impossible to find the right one. The final choice that is made is an important one, and if done right, will take some time and effort to research. What most homebuyers neglect, but should do first, is research on the different types of mortgages and companies. With a little research, thousands of dollars can be saved in the long run.
When looking at the different home loans and companies, the loan itself should be analyzed. While one part of the loan will suggest one type of loan, another part of it may be calling for a different type of loan. Each part of the loan should therefore be treated and weighed both separately and collectively. Answering a few basic questions could lead to the best home loan according to those particular needs.

First, it must be known, at least tentatively how long the person plans on staying in the home. The length of time alone will play a big part in determining which loan to apply for. If the buyer only plans on being in the home for 5-7 years, an adjustable rate loan might be the best choice. However, should they decide to live in the house 20-30 years, a fixed rate mortgage is probably the better way to go.

As in all decisions, the issue of risk comes into play. If the buyer has the personality type J, type that doesn?t like surprises and needs to know exactly what needs to be paid each month, they will be happiest with a fixed rate mortgage, because the interest rate will not change for them. This type of home loan, however, will net a higher interest rate. On the other side of the spectrum, the riskier type of person no afraid of fluctuating interest rates might be able to get a lower interest rate. In addition to this, plan ahead on anticipated incomes. Is a gradual or dramatic change in income in sight? Should a big increase be possible, one might consider a graduated payment plan which accommodates this nicely.

If the resources are available up front, it might be wise to pay a higher down payment on the mortgage to lower the monthly payments. The downside, however, is that a higher monthly payment often shortens the term of the loan to a 15-year loan, which is paid off quicker. Keep in mind, too, that there will be closing costs and fees to pay in addition to the down payment. If there is not much cash saved for the upfront costs, it isn?t a problem. In this case, it might be necessary to accept a higher monthly payment or lower monthly obligations by choosing an adjustable rate mortgage.

Once the right loan type is chosen, the right mortgage broker needs to be chosen as well. And like picking the right broker, several factors will influence the right mortgage broker that is selected.

The annual percentage rate (APR) offered by different mortgage brokers reflects the basic costs of different lenders. The APR is the cost of credit on a yearly rate, and includes any points and fees on top of the interest rates. Find out the interest rates of each lender and get a commitment of how long the lender will guarantee it.


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