Know Your Mortgage Options

Mortgage shopping isn't the most exciting part of buying a house, but it is necessary. That's why it's crucial to understand all your options before taking the plunge.

Fixed Rate: With today's lower interest rates, many people are choosing the stability of a fixed rate mortgage over other options. With this type of mortgage, every month your mortgage payment is the same, which is perfect for those who find it easier to budget monthly expenses when mortgage payments are predictable.

Long-term fixed rate: If you can qualify for such a loan, and plan on staying in your home for many years, this option may be for you.

Adjustable Rate: This type of loan is popular because it allows you to obtain a lower interest rate than fixed rate loans, and you make lower monthly payments. If you plan on moving within a few years this is probably the mortgage option for you. Of course, the downside is that the monthly mortgage payments you make will change from month to month. If interest rates skyrocket your monthly mortgage payment may exceed an amount you can afford.

Other Home Loan Options

If you have a good, steady income but have little saved toward a down payment, obtaining a loan from a home mortgage funds company, such as Fannie Mae, may be something to consider. Mortgage companies such as Fannie Mae buy mortgage loans and then sell their own loans to keep customers buying into the mortgage market.

Many loans are now available that didn't exist in the past. Potential homeowners have many options when it comes to mortgages, and as a result, more and more people are entering the real estate market. If you have a good income but little savings, a large amount of savings but little income, or poor credit, there may be a mortgage out there for you.

Balloon Mortgages: Offer lower monthly payments, comparable to a 30-year mortgage, but come due in 5 to 7 years. If you will only be in a home for a short amount of time, this may be the perfect choice, but stay away if you plan on settling down.

Hybrids: Somewhere in between a balloon mortgage and a fixed or adjustable rate mortgage. For 5-7 years you enjoy the benefits of a fixed rate mortgage, after which time you either switch to a variable rate mortgage or stay with a fixed one. With this type of loan you get the best of both worlds.

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