Thursday, August 03, 2006

Select Mortgage Option That Suits Your Situation

Select Mortgage Option That Suits Your Situation

By Rosie Romero
Special for The Arizona Republic

Jul. 22, 2006

So, it's now a buyer's market, and you're ready to jump into the world of homeownership. One of the first decisions you'll be making is what kind of a mortgage loan you'll be taking out. These days, there are many more options than when your parents bought their first home.

What type of mortgage is best for your situation?

Buying a home is a great investment. There are many types of mortgages out there. Before you decide, be sure to look at your options and see what best fits you not only now but in the long run. Your mortgage should be tailored to your individual needs, goals and plans.

The most popular is the 30-year fixed-rate mortgage. You pay off the loan in 30 years with a locked-in interest rate. No matter what the market does, your interest rate will not change. Parents and grandparents probably have this kind (and may not know of any others). This can also be done as a 15-year, meaning you'll pay off the house in half the time. Keep in mind that your monthly mortgage payment will be much more, but overall your interest expense is much lower. This is the one I recommend for most people.

Another type is the ARM, which stands for adjustable-rate mortgage. Don't let the name fool you; the mortgage rate will not start adjusting until after a predetermined time. ARM's can have a fixed term of two, three, five, seven or even 10 years. When the term is up, your interest rate will adjust to the market rate. These rates are typically the lowest possible rates available, lower than a fixed product, and come with more options, such as interest only. If you plan to be in your home for less than five years, an ARM can be very beneficial, as long as the real estate market stays strong and there's little risk of the value of your home depreciating. This is also a good option for potential homeowners with lower credit scores or those working to repair credit since they will want to refinance to get a lower rate once credit goals are achieved, such as paying off large credit card debt.

Before you start looking, it's wise to check your credit score. The sooner you iron out any errors or disputed items, the sooner you'll get mortgage approval. Errors and disputed items can be caused by many situations, including a faulty Social Security number, a name similar to yours, identity theft or a court-ordered judgment you paid off that is still on your public records. Clearing up these records can take a long time, so start now.

When you're ready to start house hunting, be sure to get prequalified and preapproved. Any reputable mortgage broker will prequalify you for a mortgage before you start house hunting. This includes an analysis of your income, assets and current debt to estimate how much you can afford to pay. There's no sense in looking at houses worth a million dollars if you only qualify for half of that amount. Obtaining mortgage preapproval means you have a lender's written commitment to put together a loan for you (income and employment verification will need to be done). The lender's letter of approval helps agents and sellers have confidence that the buyer is serious and qualified to purchase the home. Additionally, early credit approvals by a mortgage lender can expedite the closing of the loan and the close of escrow.

To help get pre-approved for a loan, call Laura Boyajian, aka, Laura B. directly today at 602.400.0008.

You may also visit her website at:


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