Choosing A Mortgage

There are many different types of mortgages available today. It's important to shop around to find the mortgage and mortgage rate that's right for you.

Contact lenders at banks and credit unions as well as mortgage brokers. Or let Allie Mae assist you in finding an approved lender. Keep in mind that the lowest mortgage rate may not always be the best choice for you. Rates are important, but also consider the overall cost of the loan.

Look at other costs such as loan and origination fees, and discount and origination points. Be sure to ask the lender exactly what he or she is quoting to you. Ask what the annual percentage rate (APR) of the loan is. The APR takes into account the interest rate and fees.

Ask for a "good-faith estimate" (GFE) in writing from each lender that you work with so you understand all of the costs and you can compare lenders. Required by law to be given to you by the lender, a GFE is a written statement itemizing the approximate costs and fees for the mortgage.

Some of the most common mortgages available today include:

Fixed-rate mortgages are stable and offer long-term savings. Because the interest rate never changes, the monthly principal and interest payment never changes either. Your payment could go up a little, however, if property taxes and insurance costs go up. A fixed-rate loan is the most common loan for first-time home buyers.

Adjustable-rate mortgages (ARMs) usually start with a lower interest rate than a fixed-rate mortgage, so your monthly payments are lower. This allows you to qualify for a larger mortgage than would be possible with a fixed-rate mortgage. The interest rate on an ARM is adjusted periodically based on an index that reflects changing market interest rates. When the interest rate is adjusted your monthly payment goes up or down. It's important to understand all the aspects of ARMs before you make your decision.

Balloon/reset mortgages may be a good choice for home buyers who don't expect to own their home past the maturity date of the balloon note: 5 or 7 years, for example. At the end of that time, you must sell your house or get a new loan, called a refinance. Expect to pay fees associated with a refinance.

Graduated payment mortgages start out with lower monthly payments; then over a period of years, your payments go up slowly. When the payments reach a certain amount, they stay fixed at that amount for the rest of the loan. Graduated payments loans are good if you think your annual income will go up.

Becoming a homeowner


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By visiting Al lie Mae you have taken your first step toward becoming an educated borrower. Al lie Mae is an objective, independent source of information for the mortgage consumer. Whether you are buying a home, refinancing, taking a home equity loan, building a home or in need of a mortgage for any purpose, Al lie Mae is here to help. Allie Mae has helped thousands of people with their mortgage needs. We have a complete selection of articles, charts, calculators, and checklists designed to help you through the mortgage and home buying process.

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