Choosing the Best Mortgage
Choosing the best mortgage is a very personal endeavor and starts with education about the different types available. Many people are under the misconception that all mortgages are equal. This could not be more wrong. There are many types of mortgages and each has its advantages and downfalls.
Fixed rate mortgages
This type of mortgage is one of the simplest. The interest rate does not change over the life of the loan. Your monthly payment for interest and principle is always the same. This is great for people who want predictable payments and do not have a lot of money to put down. However, the overall cost is somewhat higher than with other types of mortgages.
Adjustable rate mortgages
This type is also common. The interest rate changes on an annual basis. For example, the rate may be 7 percent the first year and 9 percent the next. This type of mortgage is good for people who expect their income to increase over the next few years but want to buy a house right away.
Balloon mortgages are for people who intend to move in five to seven years. The interest rate is very low, but large payments are due after only a few years.
Jumbo loans are for buyers who need mortgages over the federal guideline of $252,700. If you want to borrow more than this, the jumbo loan is the only way to go.
Finding a mortgage is a stressful endeavor; however, if you know the types of mortgages available, you will make the best choice for your future.