- Mortgage
term. Mortgages are generally
available at 15-, 20-, or 30-year terms. The longer the term, the lower
the monthly payment if the same amount is borrowed. However, you pay
more interest overall if you borrow for a longer term.
- Fixed or
adjustable interest rates. A
fixed rate allows you to lock in a low rate for as long as you hold the
mortgage and is usually a good choice if interest rates are low. An
adjustable-rate mortgage is designed so that interest rates will rise as
interest rates increase; however they usually offer a lower rate in the
first years of the mortgage. ARMs also usually have a limit as to how
much the interest rate can be increased and how frequently they can be
raised. ARMs are a good choice when interest rates are high or when you
expect your income to grow significantly in the coming years.
- Balloon
mortgages offer very low
interest rates for a short period of time—often three to seven years.
Payments usually cover only the interest, so the principal owed is not
reduced. However, this type of loan may be a good choice if you think
you will sell your home in a few years.
- Government-backed loans, sponsored by agencies such as the Federal
Housing Administration (www.fha.gov) or the Department of Veterans Affairs (www.va.gov), offer special terms, including lower
down payments or
reduced interest rates—to qualified buyers.
Slight variations
in interest rates, loan amounts, and terms can significantly affect your
monthly payment.
For help in
determining how much your monthly payment will be for various loan
amounts, use this online calculator.
http://www.realtor.org/realtororg.NSF/pages/FMCalculators?OpenDocument&Login
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