Picking The Best Mortgage

Picking the​ Best Mortgage
There are so many mortgage options available today .​
Don't just take the​ first one to​ offer nice terms -- this is​ a​ big investment.
And with any big investment,​ you​ have to​ shop around for the​ best mortgage available .​
Think about it,​ by the​ time you​ pay off your mortgage,​ you​ will have paid almost twice the​ cost of​ the​ home in​ interest alone.
For example,​ if​ you​ take a​ mortgage at​ 8% interest for $125,​000 for 30 years,​ you​ will pay over $205,​000 in​ interest,​ for a​ total of​ $330,​000 .​
And your home may not appreciate by that much -- your $125,​000 cost you​ $330,​000.
You can see why you​ need to​ shop wisely for your mortgage.
All mortgages are not the​ same .​
There are so many mortgages on​ the​ market right now that they can become a​ little confusing .​
You have to​ do your homework to​ find the​ right mortgage type,​ the​ right bank or​ mortgage company and the​ right terms.
One of​ the​ best places to​ start your search is​ on​ the​ internet .​
You can use a​ calculator to​ see how much of​ a​ mortgage you​ can afford and what you​ could qualify for .​
You can compare different loans and lenders,​ search for the​ lowest rates and even apply online.
Your first mortgage decision will be how much you​ can afford .​
The second decision is​ what type of​ mortgage you​ want.
There are basically two types of​ mortgages: fixed rate and adjustable rate .​
Fixed rate mortgages are traditional loans with fixed interest rates over the​ life of​ the​ loan .​
The length of​ repayment may be anywhere from 10 to​ 30 years .​
Your monthly payment for interest and principal will never change,​ but if​ you​ have your insurance and taxes in​ escrow,​ you​ may see a​ slight change over time .​
Downpayments usually run 20%,​ but you​ could pay as​ little as​ 5% down with certain loan programs .​
Fixed rate mortgages offer predictable payments and are especially nice if​ you​ take the​ mortgage out during a​ low interest rate period.
Adjustable rate mortgages (ARMs) start out with a​ low interest rate,​ but the​ rate and payments may go up or​ down depending on​ the​ market interest rates .​
Most ARMs are adjusted every year,​ but there are some out there that adjust more frequently .​
The mortgage usually is​ capped for how much the​ interest rate can be raised each time and over the​ life of​ the​ loan .​
For example,​ you​ may take out a​ ARM that has a​ 2/8 cap .​
This mortgage can adjust only 2 points at​ the​ maximum each year .​
Over the​ life of​ the​ loan,​ the​ mortgage can only go up by a​ total 8 points .​
If your interest starts out at​ 7%,​ the​ second year it​ could increase to​ 9%,​ and increase each year thereafter until it​ reaches a​ maximum of​ 15% .​
That is​ if​ rates continue up .​
The interest rate could also go down.
ARMs are great for those who want more of​ a​ house,​ knowing their income will go up in​ the​ next few years .​
But be aware that when rates go up,​ the​ payment amounts go up .​
You need to​ make sure you​ could make the​ payments if​ the​ mortgage was to​ reach it's peak rate.
There are also balloon mortgages and jumbo loans available out there .​
Balloon mortgages are good for those who know they will be moving in​ a​ few years .​
Jumbo loans are a​ larger than average loan for those who want to​ borrow more than the​ average mortgage amount set by Fannie Mae or​ Freddie Mac .​
There are also option ARMs that allow you​ to​ pay only a​ minimum payment amount for a​ certain period of​ time .​
These loans all come with more risk and must be thought out carefully.
You can find many articles and educational tools online that will help you​ determine the​ best mortgage for your financial situation .​
In general,​ you​ want to​ take out as​ small a​ mortgage as​ necessary,​ find the​ lowest rate possible and consider how your future could affect your ability to​ repay a​ mortgage.

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