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Which type of loan fits your needs?

One thinks lenders have cornered the market on variety. They seem to offer mortgages for every type of situation imaginable. That's not to say that every lender offers every variety and depending on your personal situation you may have to really search out a lender that can help you. If you have a good credit history, a decent down payment, a steady income without too many debts and you're borrowing money for a home you are going to live in; most likely you will be able to walk into most lending institutions and get the mortgage of your choosing. If you don't meet all of those criteria, you'll be a little more limited as to what will be available to you.

So how do you determine which loan will be best for you? The simple answer is: find a competent loan officer. We are sure that most loan officers out there are probably pretty competent. But we want you to go find one that is not just competent, but that works for a lending institution that has a good reputation and one that will really sit down and listen to your needs. They should help you analyze your current financial situation as well as help you look into your future financial and personal situation in order to help you pick the loan that’s best for you. Don't be afraid to ask them questions and make them thoroughly explain the details. That's their job! If they act like you're inconveniencing them by asking questions, go find a different loan officer!

There are advantages and disadvantages to every type of loan out there. I can't stress enough that you have to pick the one that fits you best, not the one your parents or your best friend went with. Here are some things you can be thinking about to help you decide which is best for you.

Fixed Rate Mortgages
  • Your interest rate will be locked in for the term of your loan.
  • Your principal and interest portion of your payment will stay the same for the life of the loan.
  • The interest rate will typically be higher than the current adjustable rate.
Adjustable Rate Mortgages
  • The interest rate you start with will typically be less than that of a fixed rate.
  • Your interest rate can go up or down during the life of the loan.
  • Due to the fact that your interest rate can change, it also means that the principal and interest portions of your payment can change.
Length of the Loan
  • There is a wide variety to choose from ranging from 10 to 30 years.
  • The shorter the term of the loan, the more money you are applying against the principal every month, which means you build equity faster. In the long run you will save a lot on interest payments, but your monthly payments will be higher.
  • The longer the term of the loan, the less money you are applying against the principal every month. In the long run you will be paying more interest, but your monthly payments will be lower. This may allow you to buy a more expensive home.
Low Down Payment Loans
  • There are many varieties available with a lot of them geared toward the first time homebuyer.
  • Some will require private mortgage insurance and some are government backed.
  • Some will actually be two loans, a first and second mortgage, for the person that can handle the payments but aren't able to come up with cash for a down payment.

Keep in mind that I am not a loan officer and I'm just trying to give you a basic understanding of things you need to think about when looking for a mortgage for your home. You need to talk to your loan officer to find out about what programs their lending institution offers and which ones you will qualify for in order for you to make a decision as to what mortgage is best for you.

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