Choose A Mortgage That Is Right For You

In recent years lenders have become very creative in their strategies to sell mortgages.  You can find jumbo loans, hybrids, pledged asset mortgages, and a variety of other complicated schemes, including shared appreciation, wraparound, and simple interest plans.  I find that even the most savvy of my clients who are looking for real estate in Marin County are often confused by all the options available.

Not understanding the implications of the different lending strategies and having unrealistic expectations can lead to a lot of financial complications for many homeowners.  Following are explanations for some of the more popular mortgage terms found on today’s market.

• Subprime  This controversial lending scheme can be of several types, but generally is an adjustable rate plan that initially has very low interest rates that escalate with time, creating higher monthly payments as time passes.
• Fixed-Rate Mortgage  A FRM is a simple mortgage in which interest rate is set and remains constant throughout the duration of the loan.
• Adjustable-Rate Mortgage Referred to as an ARM, this is a variable rate loan in which the interest fluctuates during the term of the loan.
• 80/20 Mortgage  One of the most popular ways to secure a no down-payment home loan is an 80/20.  Two loans are taken out, one for 80% of the home’s value, the other for 20%.  The 20% loan typically has a payoff requirement of 2 to 3 years.
• Balloon Mortgage  A fixed-rate mortgage with lower monthly payments initially, then a large balloon payment later in the life of the loan.
• Convertible Mortgage A convertible mortgage starts as either an adjustable or fixed rate mortgage, and at some point in the life of the loan converts (either from adjustable to fixed, or vice versa).
• Interest Only Mortgage This type of mortgage requires interest only payments in the early years of the loan.
• Jumbo Loan Sometimes referred to as non-conforming loans, a jumbo loan exceeds the maximum loan limits set by government-sponsored programs Fannie Mae and Freddie Mac.  Occasionally you’ll hear lenders refer to any very large mortgage loan as a jumbo loan.

When shopping for a mortgage, do your homework and be realistic about what you can afford!!  Know what is available – and understand the terms.  Every type of loan has advantages and disadvantages, and a little research can go a long way in helping you to make the right decision.

• Rate this Post!

  Select Your Rating:

  • 5 Stars (Excellent!)
  • 4 Stars
  • 3 Stars
  • 2 Stars
  • 1 Stars (Poor)

• Share this Post

  Share With A Friend:

  Your Name Your Email

  Friend's Name Friend's Email

  Optional Message

  Send

• Print
• Social Bookmarking

  Add to Bookmarks: