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.
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.
