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A mortgage requires you to pledge your home as the lender’s security for the repayment of your loan. The lender agrees to hold the title to your property (or in some states, to hold a lien on your title) until you have paid back your loan plus interest. If you do not repay your mortgage loan, the lender has the right to take possession of your house and sell it in order to satisfy the mortgage debt.
There is a wide selection of mortgage loan programs available in today’s market, and you should narrow the field by considering your particular situation. How long you plan to keep your home will be a huge factor on the type of mortgage program you chose. We are here to help and can explain in detail about the different loan programs and what will best fit your needs and budget.
If you expect to live in your home for many years, the interest rate of your mortgage loan may be your primary consideration. You may want a fixed rate mortgage that will ensure that your interest rate & monthly mortgage payment will remain the same for as long as your have your loan.
A 30 year fixed interest rate is one of the most desirable mortgage loan program in the nation, most people seek the low monthly payments and prefer a 30 year fixed rate mortgage as compared to a adjustable rate mortgae (ARM). The interest rates are volatile and always move up and down briskly, and therefore the majority of people like to stay with a constant fixed mortgage interest rate.
A 15 year fixed-rate mortgage offers a lower interest rate than a 30-year or a 20-year fixed rate mortgage and will save you a significant amount of mortgage interest over the life of a loan. You will build up equity in your home quickly, which can allow you to move to pay off the mortgage loan sooner or move to a more expensive home sooner.
7 Year ARM, 5 Year ARM, 3 Year ARM, 1 Year ARM, 7/1, 5/1, 3/1, 1/1
An adjustable rate mortgage (ARM) is a loan with an interest rate that can be adjusted at pre-set intervals. The amount of the adjustment depends on several factors outlined below. Some ARM loans have an initial period when the interest rate is fixed for a period of time 2,3,5,7,or 10 year.
7 Year Balloon, 5 Year Balloon, 3 Year Balloon
Balloon loans are short-term mortgages that have almost similar features of a fixed rate mortgage. The loans provide a constant payment feature during the specific term of the loan, but as compare to the 30 year fixed rate mortgage, balloon loans do not fully amortize over the original term. Interest rate and payment stays the same until the loan is due. Characteristically, the entire loan amount is due in either 3, 5, or 7 years.
For a buy down mortgage loan program, the interest rate and payment remain unchanged for a fixed period, at the end of which, the interest rate and payment both increase. The interest rate and payment may increase once, twice, or even three times, depending on whether the Buy-down is a 1/1, 2/1, or 3/1.
Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point.