Choosing a Mortgage - There are many factors you should consider when deciding what type of mortgage will best fit your situation. Some of these factors include: length of time you plan to spend in the property, interest rate market conditions, housing market conditions, credit rating, length of time to retirement, type of home (investment or primary residence), current and future income, type of income, etc.

The length of time you plan to spend in the house or the amount of time before you refinance again can affect the type of mortgage you choose. For example if you are buying a starter home, and plan to move to a bigger home in the next 5 yrs, you may want a 5/1 ARM rather than a 30 fixed rate. However if this is the bigger home you are buying and you plan to live there until your new born graduates college, a 30 yr fixed rate may be more appropriate.

Rates change every day, sometimes during the day. The interest rate you qualify for depends on your credit score, the type of loan you want, loan to property value, and other factors. The best mortgage professionals always discuss needs and financial situation before quoting rates.

Interest rate market conditions can affect what type of mortgage you choose as well. Considering we are currently in a rising rate market (while rates fluctuate daily there is a general upward trend) a fixed rate mortgage is generally preferred over an ARM. In the past while rates were on a downward trend borrowers with an adjustable rate mortgage could take advantages of not only lowering rates, but saved on closing costs because they did not have to refinance to get the lower rates.

When comparing programs from different brokers, make sure you are comparing the loan programs with the exact same terms. Always obtain a good faith estimate (GFE) and a truth-in-lending statement (TIL) to help you determine what is best for you.

The type of mortgage that you choose may also depend on your credit. If your credit is poor and you are in the process of cleaning up your credit then a shorter term ARM may be best for you. You can take advantage of lower rates than a fixed rate while you clean up your credit and then refinance later when your situation has improved. If you have excellent credit than this would not be a factor.

Real property investors often choose loan programs with low monthly payments, for if the monthly mortgage payment is smaller than the rental income, the property has a cash inflow, which is almost always preferred to one with monthly cash deficit. Some of the loan programs that offer low initial monthly payments are Adjustable Rate Mortgages (ARM), Option ARM, Interst-Only loans, Hybrid mortgages, and Balloon mortgages.

Credit rating is very important when applying for a loan. Higher scores typically means less paperwork. The lower the score, the more documentation you will need to close. In addition the higher the score the higher LTV or loan-to-value you will qualify for. If you are unhappy with your credit rating then seek out a credit repair company to help with the negative items on your cedit report. In most cases your mortgage broker will be able to recommend a good company.

Another note about your credit rating; if your credit card company pulls credit on you like they normally do once a year and find that your scores have dropped, they can raise the interest rate on your card at their discretion. It's really important to keep those scores as high as possible.

Be sure to choose a mortgage professional who takes into account your own unique situation, to recommend the best loan options for you.

Your current and future income may also be a factor when considering what type of mortgage to obtain. In many situations borrowers are employed in an industry that has consistent dependable salary increases. In that instance a borrower can expect to be making more money in the next 3-5 yrs, thus they can afford a larger payment down the road. An Interest Only option on your mortgage may fit your need. You can afford a larger home now, and you will be able to afford the future increase in payment when the interest only period ends.

The housing market may affect what type of loan you choose. Is the market strong with large increases in home value over short periods of time? That would mean you could afford to take on a more non-traditional loan. Or you could save the down payment for other purposes and go with 100% financing. Is the market slowing down or in your area are home prices dropping? You may want to keep saving for a couple months and use that money for a larger down payment, so you don't end up owing more than the home is worth in a year or two

The type of income you make may affect the type of mortgage that is a fit for you. Do you work in a stable industry with a high degree of job growth, high likely hood of continued employment with increasing salary? Then you may want to go for the basic fixed rate or an interest only loan. Is your income vairable, do you make seasonal changes in income, is it a sales job where your income is up one month and down the next? Maybe an loan with flexible payments would match your income such as a Pay Option ARM.

Choosing a Mortgage
MY Mortgage
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