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Mortgage Loan Options

You have finally found your dream home. You did your 'home'work and have been prequalified and preapproved so you know you can afford the house. Now you have to complete the formal mortgage application process. There is a dizzying array of options available to you but you need to find the one that best suits your needs. Here is a concise listing of some of the more popular choices.

1. Fixed Rate Mortgage
   A Fixed Rate Mortgage offers an interest rate and monthly payments that never change. This type of mortgage offers stability to the borrower in that you are not affected by the swings of fluctuating rates. Further, a consistent monthly payment makes it easier to manage a monthly budget for most folks.
   This is also a popular choice for homeowners planning to stay in their homes for many years as they can end up saving money in the end. These mortgages may be more difficult to qualify for than other types of loans but for those with good credit, this is a very popular choice.
2. Adjustable Rate Mortgage
   Adjustable Rate Mortgages (ARMs) offer an interest rate that adjusts up or down over the term of the contract. The initial interest rates are lower but over time, the rate can adjust up or down, usually up. This type of mortgage often suits people that don't plan to stay in their homes for an extended period and is easier to qualify for in that the starting rates and payments are lower. ARMs commonly offer fixed rate periods of three, five, or seven years with the rate adjusting annually thereafter.
3. FHA Loans
   Federal Housing Authority (FHA) loans are insured, but not funded, by the FHA. Designed for low-to-middle-income and first-time homebuyers, FHA loans tend to have more lenient qualifying standards than other conventional loans. This can be an especially attractive option for people buying their first home, as there are many programs within the FHA to facilitate establishing credit and purchasing your first home.
4. No Document Loan
   This type of loan provides a convenient means of securing financing for people that do not want to verify their income or are self-employed. This loan is an option for people with little or no credit or those with a checkered credit history. These loans typically have higher interest rates and fewer lenders are likely to offer them.
5. Negative Amortization Mortgage
   This type of mortgage offers flexibility to the borrower in that they can choose to make monthly payments that are less than the accruing interest on the loan. If the borrower chooses the minimum monthly payment, the loan balance increases by the amount of interest not paid. An advantage is that the borrower can choose to make the full or minimum payments or any amount in between. This loan can be a practical choice for someone that does not have a steady, reliable income.

These are oversimplified versions of what can be a very complex process. You should speak to a number of different lenders to find the type of loan that will best fit your situation. The better informed that you are, the more likely you are to find the loan that will save you money and make owning your own house a reality.

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