Mortgage Information
All the information you need when looking for a mortgage.

All About Mortgages

Types of Mortgage Loans

The first step in getting a mortgage is to decide the type of mortgage loan that is best for you. There are many types from which to choose.

Fixed Rate Mortgage: This is the most common loan type. You may get a fixed rate mortgage for 10, 15, 20, or 30 years. It is important to understand that if you opt for a 10 year mortgage, you may save thousands of dollars on interest in the long run, but your monthly payments will be substantially higher than those of a 30 year mortgage. The appeal of a fixed rate mortgage is that your interest will remain the same throughout the life of the loan. Although property taxes and homeowner’s insurance may increase slightly over time, your monthly payments will remain virtually unchanged.

Adjustable Rate Mortgages (ARMS): On the other hand, an ARM may be the right loan for you. ARMS generally start out with lower interest rates than do fixed rate mortgages. For this reason, monthly payments will be lower, and this type of loan might allow you to purchase a more expensive home. The drawback to this, however, is that your monthly payments adjust to the current market at specified time intervals throughout the life of the loan. In other words, if interest rates rise, your payments will go up also. If interest rates lower, however, you will see that reflected in your payments as well.

Federal Housing Administration (FHA) Loans: This type of loan is designed to help low income families obtain a mortgage with monthly payments that are suited to their budgetary restraints. Usually, with this type of loan, low or no down payments are required. Talk to your financial institution about eligibility requirements for this type of loan.

Veteran’s Affair (VA) Loans: Any Veterans who were on active duty in the military from World War II to the present, and who were not dishonorably discharged, may qualify for VA benefits. Spouses of veterans who were killed in combat, who have not remarried, may also be eligible for benefits. With a VA loan no down payment is required, there is no monthly mortgage insurance to pay, interest rates may be negotiated with the lender, and financial counseling is available in times of financial difficulty.

Subprime Loans: This type of loan is for those with poor credit history. Because lenders consider it risky to lend money to those who have had financial trouble in the past, a subprime loan generally requires a higher down payment and a higher interest rate of the borrower. Subprime loans give those with poor credit history a chance to clean up their credit, and ultimately refinance their mortgage to obtain a lower payment on down the line.**Be sure to find out from your lender what specific types of loans they can offer you.

Lowering your Payments

* It is important when getting a mortgage loan to be aware of the current market. What interest rate can you expect to pay on your loan? What are the average home prices in your area? Decide on a budget and see how these factors will fit in with it.
* Once you have decided on a home, ALWAYS shop around when searching for a mortgage lender. Companies will often have competitive rates to offer…especially if they know that you are finding lower rates elsewhere.
* If you have it to spare, putting money down will go a long way towards lowering your monthly mortgage payments. The more money you pay up front, the less you are paying interest on.
* Paying “points” (1% of the total loan amount) can also reduce your payments. If you pay points, you are basically paying money up front to reduce your interest rate, therefore reducing the total interest paid over the life of the loan.

What is an Annual Percentage Rate (APR)?

The APR shows the cost of a loan expressed as a yearly interest rate. The APR includes other fees associated with the loan such as the interest, points, and mortgage insurance. The Annual Percentage Rate of your mortgage will vary based on the type of loan you get (see above) and the average percentage rate at the time of your purchase.