ilovecolorado
Joined: 24 Jan 2008
Posts: 4
Location: Boulder, CO
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| Posted: Fri Feb 15, 2008 9:00 am Post subject: Which Mortgage Should I Choose? |
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The lending industry can be a confusing place for potential buyers. There are adjustable rate mortgages (ARM’s), interest-only mortgages, traditional mortgages, all-in-one mortgages and more. There are loans with no points that have higher interest rates and loans that you can allocate funds towards points that carry lower interest rates. How does a potential buyer choose which mortgage is right for them, what makes the different mortgages, well, different? Why do certain lenders advise buyers on a specific type of mortgage?
To provide a little more clarity in a murky world, you need to ask yourself and your lender some questions. Knowing as much as you can about the different types of mortgages will help you be an informed buyer and make wise decisions when it comes time to choose a mortgage.
The first question you should answer is: how long you expect to be in this particular home? If you don’t plan on being there for very long, then a 30 year mortgage with a fixed interest rate may not be right for you. An interest-only loan may be a better option if you plan on only living there a short time and then selling.
Check out the lender’s reputation as thoroughly as possible. Some lenders are underhanded, stacking hidden fees and charges against the buyer while never revealing everything that’s going on. The Internet is a great way to find feedback on particular lenders; checking forums and message boards will reveal a lot of information about lender practices and performance. Trust is imperative in choosing a lender, so do your homework and make sure you’re comfortable with the lender.
Check out the interest rates the lender offers and how long they will guarantee them. Is the rate variable or fixed? Get any promises in writing.
Determine how much you can provide as a down payment. The larger the down payment, the lower the monthly payments will be. If you don’t have a lot of cash upfront you can always choose a higher interest rate or an adjustable interest rate; these will lower the amount required for down payment.
What risks are you willing to accept? If you have the resources or the willingness to take the risks, an adjustable rate mortgage can give you a lower rate, while a fixed rate will provide you the knowledge of exactly what your monthly expenses will be, but at a higher interest rate.
Another option for determining which mortgage is right for you is the use of an Independent Financial Advisor (IFA). These folks provide incredible services, taking your needs and desires into consideration and showing you which mortgages are currently the best on the market and what types of mortgages work with your current needs and monetary situation. IFA’s are usually independent entities and have no reason to advise you to choose one type of mortgage over another or one lender instead of their competition. Using an IFA can greatly reduce the amount of stress involved with deciding what mortgage is right for you. |
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