|
How To Choose The Right Mortgage For Your Needs
Author David Schneider | May 23,2007
|
The different types of mortgages that are available are more than a little confusing to the homebuyer. This may be the reason so many do not shop around much to find one that is best suited to their needs. The more informed you actually become, the better equipped you are to get a better deal. This way, the lender is not making all of your choices for you. The truth is that it is not that difficult, but often depends on your particular needs. Here are some tips that will enable you to choose the right mortgage.
Types Of Mortgages
Mortgages come in two basic types -fixed rate mortgages and adjustable rate mortgages. A fixed rate mortgage provides you with a monthly premium that remains constant throughout the life of the mortgage. You will never be shocked by a change in your premiums. An adjustable rate mortgage, however, is the opposite. After a fixed rate early portion of the mortgage, often 3,5,7,or 11 years, it then switches to the adjustable part. During this time, your premium changes regularly - either monthly or annually - depending on your terms.
The advantage of one over the other will be decided by the economy. In times of rising interest rates, the fixed rate mortgage provides the better deal - since it will not change. The adjustable rate mortgage, however, is the mortgage of choice during good economic seasons when rates are lowered. An adjustable rate mortgage is often used to get a larger house, but may need to be quickly refinanced if interest rates start going up. If you start with a fixed rate mortgage, and then discover that the rates are going down, you also can re-mortgage.
Use Financial Wisdom
The temptation is clearly out there among mortgage specialists to try to get you into that dream home - that is really beyond your budget. Remember they can't lose - you make the payments, they get money; you don't make the payments - they get the house. A good and wise percentage is to go for a payment that will stay around 28 percent of your income. Getting a mortgage that is higher than that may indicate trouble could be soon headed your way, unless you are sure that your income will soon increase. Remember that the mortgage payment is not your only debt, too.
Learn Ways to Reduce The Total Mortgage
While it may be more convenient to you to go for a 30-year mortgage rather than a shorter term, like 15 or 20-years, the shorter terms could save you tens of thousands of dollars. It is even possible that a 15-year mortgage could save you as much as one hundred thousand dollars. Be sure to consider the total amount that you will pay into your calculations.
If you are not able to get a shorter term mortgage, then you may just want to try and add one extra payment a year, which will reduce the total time by several years in the long run and produce similar savings. Make sure that the mortgage terms do not have a penalty for early payoff.
Another good way to save money is to pay as much up front as you can. If you can, pay up to 20 percent in order to avoid Private Mortgage Insurance and higher interest rates.
Before you apply for any mortgage, you want to get a copy of your credit report and make sure it is correct. Both your acceptance and interest rate could be at stake if you do not. There are often mistakes on these reports that can drastically effect your ability to get the mortgage you want.
Compare Offers
Get several different quotes and then compare them carefully to discover which deal is best for you. Mortgages that are equal in length are the only ones that you can accurately compare to each other. Look at the fees separately and the interest rates. It will not take long to see one or two that will stand out from the rest as being better.
Consider The Points
Points are used by the lender to try and even out the difference between the rate locked in and the actual rate at the time of the signing. You can, however, also agree to pay even more points in an effort to lower your interest rates. Paying points is one way to do this, and definitely can save you some money in the long run.
You can start right now and get some quotes for your next house by going to QuoteMatch.com. Just enter in your information, and several mortgage lenders will send you their best quotes for you to consider. Just apply the information from this article and you will soon be able to choose the right mortgage for your needs. |
|
|
Print
E-mail
Del.icio.us
Digg
