Do Your Homework - Find the Mortgage That Fits Your Lifestyle and Your Budget

You have searched the house for months and finally found - a house that is right. Now all you have to do is buy your new home, move and settle, right? Not really. There is another big step to go, getting a mortgage. You'll want to decide what type of mortgage and payment terms that fit your budget. And you'll have to prepare myself doing some research. Below is valuable information that is crucial to help make lending decisions that fit your budget and circumstances.

From the series: 3 Find a perfect match your home mortgage

Factors that affect your mortgage

Mortgage payments are determined based on the following criteria:

Loan Amount

Length of Loan

Advance

Discount Points

Closing costs

Credit Quality

Income levels

Lock period

Loan amount: The amount of your loan can increase your interest rate if the loan amount financed exceeds the limits set by Fannie Mae and Freddie Mac (the private companies regulated by the federal government), which administers the loans. Response to changes in the loan limit at the beginning of each year.

Shorter loans, such as 30 years or 15 years in the mind can save you thousands of dollars in interest payments over the life of the loan but your monthly payments are high. Adjustable Rate Mortgage, you can start low-interest fixed-rate mortgage, but your payments could get higher when the interest rate changes.

Payment: The payment increases the best rate. If you have the money now and want to reduce your payments you can pay points to lower your mortgage rate on your loan. The principle is simple: In exchange for more money upfront, lenders are willing to lower interest rates, cutting the borrower's payments. Remember to consider upcoming expenses and closing costs for its decision to pay.

Closing costs. In addition to your down payment, you must pay closing costs for processing your loan and the property seller to the buyer for you. Closing costs can range from 3% -5% of the loan amount, depending on where you live, your choice of home loan and the closing date. In some cases, you can finance certain closing costs on your mortgage. If you are applying for a loan from your lender will give you an estimate of closing costs, including:

Initiation fees.

The cost of processing your loan (includes property survey and evaluation).
Items paid insurance premium first-year mortgage, the risk of paying the first year and first year of the flood or earthquake insurance premiums, if necessary.

Escrow accounts - an account where homebuyers to the lender typically pays the city tax / county property and hazard insurance for mortgage insurance, if necessary.

Title insurance premiums.

Registration and transfer rates.

Attorney fees.

Credit Score: Your credit and debt to income ratio affect the terms of your loan through your FICO score, which is used to establish its classification. If you have good credit and your monthly income exceeds the monthly debt obligations, you can get the discount rate. However, if your monthly income barely covers your minimum debt obligations, you will not be in the lowest interest rate possible, even if you have a good credit report.

The lock-in Rate: When shopping for a loan to take into account that interest rates change frequently. It is important to ask your mortgage representative if the lock frequency is possible. It gives you a flat rate plans to close the loan within a specified period.
Determine how large you can afford the monthly mortgage payment

Your choice of mortgage will be influenced by issues such as
How old is the intention of living in your new home?
How important is it to be free of mortgage, before facing bills of their children for college or planning your future retirement?
How do you feel with your mortgage payment fixed firmly against a payment can change over time?

Your monthly payment will vary depending on the type and duration of the loan and the amount you planted. Most lenders will help you select the loan that best fits your financial situation.

How low interest rates can be expected?

shorter-term loans offer lower interest rates, and is divided into two categories. fixed mortgage means that the interest rate is locked for the life of the loan. Adjustable Rate, also called variable-rate bond or ARM is a note that generally offers lower payments in the first year and then change periodically according to the terms of your note. With a discount "points" can lower your interest rate. If your loan requires you to pay points or if you want to buy "down" the interest rate with points, remember that one point equals 1% of the loan amount.

Choosing the right mortgage

If you want stability and predictability in determining the life of your loan, fixed rate mortgage can work for you. Generally, as long term mortgage, you pay more interest over the life of your loan. Although long-term means your monthly mortgage payment is less than comparable mortgage has a shorter term.

30 years vs. 15 years fixed rate mortgage.

30-year mortgage has lower monthly payment and an interest rate higher than the 15-year mortgage. You are required monthly, but smaller than have to pay more at home in time, and to pay with interest over a longer period of time.
Moreover, the 15-year mortgage has higher monthly payments and lower interest rate you pay less for your house, because you pay off in the short term.

Adjustable Rate Mortgages.

The guns are fixed-rate loans short term: After the fixed rate period is up to the current interest rate is adjusted periodically in accordance with the conditions at that time. 5.1 ARM, for example, is a fixed term of five years and then adjusts annually for the next 25 years. (The weapons are usually run on a 30-year schedule.)

The duration of ARM-term, fixed-rate typically can range from one month to 10 years. Over the course is set, the higher the interest rate you can get. But in general - and there are exceptions in the past - will cost less under arms. Both the ARM and the interest rate on your monthly payments are lower than the 15-year fixed mortgage or 30 years.

ARM is a risk that if interest rates rise, you could end up paying much more than they expected. Check if your arm is the maximum rate so that when the volunteer, the change does not exceed a predetermined limit.

If you know you can be home for 12 years or more, the 30-year mortgage fixed rate might work better for you than, say, 5.1 on ARM, which determines the rate of five years and then adjusts each year thereafter. But if you think you can not get at home more than five or six years, ARM 1.5 can be useful.

Mortgage Shopping Tips.

Talk with your mortgage bank. If you are starting to look in your home that can measure its financial situation and help determine the purchase price that is within your budget, and a mortgage program that fits your lifestyle and income. In many cases, your advisor can prepare a pre-approved mortgage before you finally accept the purchase.

Ask a mortgage specialist at your bank, to help you calculate different payment types. This will help you determine monthly payments, which can be easily integrated into your budget.

Types of Mortgage Programs.

Most lenders are committed to ensuring that the home financing experience is rewarding and effortless. There are several programs available to suit different situations, lifestyles and your financial profile. These include:

fixed rate loan. If you have found a house they intend to live for 10-30 years, consider a fixed rate loan. This is a predictable and stable since the interest rate to determine the length of the loan. Since the monthly payment of principal and interest is the same for the life of the loan is easier to plan a budget. Most lenders offer many fixed-rate loans with terms that fit your budget, including loans that require no down payment.

Adjustable-rate loans.

If you go home for a shorter period of time, or expect your income to increase in years, adjustable rate mortgage (ARM) may be right for you. ARM usually starts from an initial interest rate lower than the traditional fixed-rate loans. After the initial payment period (usually one, three, five, seven or ten years), the interest rate may vary periodically (usually once a year or once every six months), based on conditions market. Since the change, changes in monthly payment. ARM loan adjustment function "cap", which determines how much interest rates may increase. This helps protect you from large increases in their monthly payments.