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Home Loans and Mortgages - The Selection Can Be Bewildering

For years, when someone wanted to purchase orone percent or so. The difference is that the
refinance a home, the choices were simple.rate can adjust over time as the market
The buyer chose either a 15-year fixed-ratechanges. The loan agreement will spell out
mortgage or a 30 year fixed-rate mortgage.how often the rate may change and how much
That was it. Of course, those were also thethe rate may change at one time. The
days of twenty percent down payments, whichagreement may also indicate a maximum
seriously hindered the ability of manyinterest rate that may be charged over the
Americans to obtain the loan necessary to buylife of the loan. These types of loans are
their own home. In recent years, moreideal for buyers who do not intend to stay in
flexible loan types have become available andtheir home for more than a few years, or
down payment requirements have been relaxed.buyers who are purchasing in times of high
There are now far more choices of loan typesinterest rates, when there is an expectation
available for the borrower than ever before.that  rates  will  drop  over  time.
That can be a mixed blessing, however, as
prospective borrowers now have to do aConvertible mortgages are ARMs that offer the
tremendous amount of homework in order tobuyer an opportunity to "convert" the
determine which type of loan might be theadjustable rate loan to a fixed rate loan
best choice. The selection of loan types thatafter a certain period of time that is
are currently available can be quitespelled out in the loan agreement. There is a
bewildering, and the wrong choice could costfee charged for converting the mortgage, but
the prospective borrower thousands of dollarsthe fee is typically less than the fees
over  the  term  of  the  loan.associated with refinancing the mortgage
altogether.
The standard 15-year and 30-year mortgages
are still quite popular. Each provides theTwo Step mortgages offer an initial rate that
stability of a fixed interest rate and ais lower than the rate for fixed-rate
payment that will remain the same throughoutmortgages for the first few years of the
the duration of the life of the mortgage.loan. After a set period of time, the rate
When interest rates are near historic lows,increases to a fixed rate. This allows buyers
as they are today, these traditional choicesto pay less during the early years of their
work well for most buyers. Buyers who find aloan, when they may earn less or need extra
15-year or 30-year mortgage to be withincash for home furnishings. The disadvantage
their means would probably benefit fromof this type of loan is that the increase in
obtaining  such  a  mortgage  now.the interest rate can be substantial, and may
make the payments unaffordable for some
In recent years, as home prices havebuyers..
increased faster than wages, the lending
industry has created more flexible types ofThese are just a few of the types of loans
mortgages designed to help buyers who maythat are currently available in the market.
have trouble with traditional loans obtainThere are probably dozens of variations on
financing. These types of loans tend to haveARM loans, and prospective buyers should
adjustable  interest  rates:study their options carefully before agreeing
to a loan. Making the right choice could save
The Adjustable Rate Mortgage, or ARM, has abuyers thousands of dollars over the life of
rate that adjusts over time as spelled out inthe loan. Making the wrong choice could leave
the mortgage agreement. Typically, the ratebuyers with a loan that they cannot afford to
at the time of singing the loan is lower thanpay. A little time spent on research is time
that of a traditional mortgage, perhaps bywell spent.



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