The answer depends on several factors including your financial situation. Lets take a look at the main differences between the two types of mortgages.

Fixed Rate Mortgage

Two major components that are needed to compare fixed rate mortgages are the interest rate and the points. Points are fees paid to the lender at the beginning of the mortgage period. They are based on a percentage of the loan. So, one point equals one percent of the loan amount. Therefore, a $100,000 mortgage with 1.5 points would cost $1,500.

One lender may offer a lower interest rate than another but the points may be higher resulting in a less attractive loan. The important consideration here is the length of time you plan to hold the mortgage. The longer you plan to keep the mortgage, a higher point with a lower interest rate makes more sense. And, the less time you plan to remain in a home you may be more likely to benefit from low or no points with a higher interest rate.

In addition, be sure to ask your lender the total of all fees involved. Lenders can tack on various fees that can add up in a hurry.

Some common fees are:

* application fee

* credit report

* property appraisal

* title insurance

* escrow fees

Request an itemized list of all fees in writing so you can compare mortgages fairly.

Adjustable Rate Mortgage

Selecting the best adjustable rate mortgage (ARM) is basically impossible because there are some unknowns. However, you can look at a few of the loan factors and depending on your situation make a decision you can live with.

The interest rate that an adjustable rate mortgage starts off with is called the start rate. This rate is the least important consideration when looking at ARM’s because it will change. The start rate is often used as a teaser rate to make you think that the loan has good terms.

The more important factors to consider when deciding on an ARM is a formula of index and margin equals the interest rate. The index is what the lender uses to calculate your specific interest rate. Indexes can differ in how quickly they respond to interest rate fluctuations. Some common indexes used are Treasury bills (T-bills) and Certificates of Deposit (CD). The margin is a fixed figure which is added to the index to get the interest rate. Margins are typically about 2.5 percent.

Another important consideration is the frequency in which the mortgage rate is recalculated. Some ARMs adjust monthly, while others only adjust every 6 or 12 months.

Also, rate caps are used to limit the amount the rate can change within an adjustment period. An adjustable rate mortgage that adjusts every 12 months may be limited to a 1-2 percent change up or down. There should also be a lifetime rate cap to limit the rate change over the life of the loan which is usually around 5-6 percent higher than the start rate.

Before accepting an ARM you should figure out the payment at the highest rate allowed to see if you can handle the worst case payment.

Lastly, other lender fees should be considered with a request for a written total fees statement.

Fixed vs. ARM Payments

A fixed rate mortgage is just that, a fixed interest rate for the life of the loan. The payment will always stay the same without fluctuation, however, the risk is that if rates drop significantly you may be stuck with a higher rate.

ARM interest rates can fluctuate many times over the life of the loan, thereby, changing your monthly payment amount. ARMs offer potential interest savings because the start rate is typically lower than a fixed rate. Also, if rates drop or stay the same there will be a continued savings compared to a fixed loan. But, if rates rise an ARM will cost more than the fixed rate loan.

Choosing a Fixed-Rate vs. an Adjustable-Rate Mortgage

First, consider the risk you can take with the monthly payment amount changing. Do you have savings? Or are you budgeted to the max without any emergency savings? If you can’t afford to pay your ARM at the highest payment amount you should steer clear of this type of loan.

Also, consider how long you plan to have the mortgage. Generally, ARMs are better for a mortgage of 5-7 years. If you plan to keep your mortgage for the long-term a fixed-rate mortgage may be the better, less stressful choice.

Lastly, if the thought of having an adjustable rate mortgage stresses you out…don’t do it! The stress is never worth the potential savings. And, if rates drop significantly you may have the option to refinance to a lower rate anyway.

Author: Jillian Rae
Article Source: EzineArticles.com
Provided by: WordPress plugin Guest Blogger

Ive been renting for years now; Ive always paid my rent on time. Ill start a savings account soon, so I can buy a house: sound familiar? How much is in that savings account now? Just as I thought, not enough, you went on vacation, found a car you had to have, or WOW; look at the flat panel T.V. on the wall that youre renting, etc, etc. Theres a secret that your landlord doesnt want you to know; you can buy a house with zero down payment. Do you want to know how? Hang on, here we go. Hire a good mortgage professional, its that easy. Do you want to know more? Of course you do, here are some mortgage programs to help you.

Many companies will do a 100% one loan. This program can be done as a conforming, (good credit, full income documentation; prove income through W-2s and recent pay stubs) or sub prime (those borrowers that dont quite fit into conforming guidelines due to less than perfect credit or trouble verifying income).

There is an 80/20 combo home loan too if you dont mind paying 2 monthly payments to pay your mortgage. The advantage to this is you dont have to carry mortgage insurance on your first mortgage as your loan to value is 80%, thats the cut off for carrying mortgage insurance. That usually means a savings of $40.00 to $90.00 per month over a 100% one loan, however the 80/20 combo home loan is a bit more difficult to qualify for.

The best option, if youre non-military, is a FHA mortgage loan. This is a mortgage thats backed by the government so theres less risk to the lender. Now a FHA mortgage loan requires a 3% down payment, but that can be gifted through a down payment assistance program that the seller participates in. The great thing about a FHA loan is the interest rates are low and usually the seller of the home will pay most of your closing cost. Therefore youre buying the house with zero or very little out of pocket expense.

If youre in the military or a veteran of the military have your mortgage professional check your eligibility to use the VA (Dept. of Veteran Affairs) to back your mortgage. The VA requires zero down payment at a low mortgage interest rate, and your seller will generally pay the majority of your closing cost. Again, youre buying the house with very little or no out of pocket expense.

These are the most popular programs for a zero down payment mortgage. You dont have to have perfect credit or a ton of money to buy a home. Just prove youre responsible, have the ability to pay for your home, and the willingness to pay for your home. The mortgage professional you hire should have a list of real estate professionals to help you in your search for a new home, always use a Realtor to help you, it will make your life much easier, and the seller pays their commission from the sale. Good luck house hunting and finding the perfect mortgage program for you.

Author: Marc Sisk
Article Source: EzineArticles.com
Provided by: Guest blogger

Theres no question about it: Buying a first home is a big financial commitment. In most cases, a home is the largest single purchase an individual or family will make in a lifetime. However, because of the tax advantages afforded to homeowners, buying a home also can be one of the best financial decisions youll ever make.

Problem is, many would-be homeowners remain renters simply because they mistakenly believe mortgage lenders require that buyers come up with 20 percent of the purchase price as a down payment. While its true lenders feel its less risky to work with buyers who are able to bring a substantial down payment to the table, the standard 20 percent requirement is fast becoming a relic of the past. In recent years, lenders have become more flexible in working with first-time homebuyers by creating a variety of special programs that require only a small down payment. These programs, combined with the most favorable interest rates in two decades, have encouraged growing numbers of renters to consider the tremendous benefits of home ownership.

While the list of programs offered by individual lenders is too extensive to mention in detail, here are some common programs you are likely to come across as you work with your real estate agent to purchase your first home:

Federal Housing Administration (FHA): FHS mortgages allow homebuyers to purchase a home with as little as a 5 percent down payment, and to finance all non-recurring closing costs. The current maximum loan amount in most urban markets is $151,725. In addition, borrowers are allowed to use up to 41 percent of their gross income toward paying mortgage debt well above the ratio allowed under most private programs.

Department of Veterans Affairs (VA): VA mortgages allow veteran or active service personnel purchase home with no down payment, up to the current maximum price of $184.000. However, there is no purchase price limitation for buyers able to make a down payment. Like the FHA program, VA borrowers can put up to 41 percent of gross income toward their mortgage debt.

Mortgage Revenue Bonds and Mortgage Credit Certificates: Mortgages funded with these instruments typically require a minimum of 5 percent down and have interest rates that are 1.5 to 2 percentage points below conventional 30-year fixed rates. These types of loans, offered by state and local housing agencies, are available only to first-time homebuyers. There generally are income and purchase price caps that vary, depending on where you plan to buy.

Private Mortgage Insurance: Most major lenders offer privately insured mortgages, which generally require a 10 percent down payment (although some lenders offer loans with a 5 percent down payment to buyers with exceptional credit). These loans typically are not limited by maximum loan amount or purchase price limitation.

Community Homebuyer Program: Through their networks of mortgage lenders, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) offer Community Homebuyer Program loans. These programs require a 5 percent down payment, 3 percent of which may be a gift. To further help buyers qualify, applicants may use 38 percent of their gross income. Currently, the maximum loan amount available through these programs is $203,150.

Clearly, there are a lot of options for first-time homebuyers. While lenders will be more than happy to share information about their own programs, you can save yourself a good deal of time by first selecting a professional real estate agent who is experienced in working with first-time buyers in the areas where you plan to buy.

An agent who focuses on first-time buyers will know from experience which lenders in your area offer a low down payment program that will meet your unique needs.

Today, taking the first step toward owning your own home is easier than before. Your real estate agent is your best resource for finding innovative ways to help you come up with a down payment and qualify for financing. Theres certainly no need to wait until youve saved a 20 percent down payment!

Author: W. Troy Swezey
Article Source: EzineArticles.com

In the past, homebuyers more or less had limited mortgage loan options. These days, there are more options than you can shake a stick at, but heres a primer on the basics.

Mortgage Loans

With the real estate market explosion over the last 10 years, a call has gone out for unique mortgage loan programs. Bankers have been more than happy to answer the call. For many borrowers, traditional mortgage loans still fit the bill. Heres an introduction.

1. Conforming Loans The loans comply with requirements set down by Fannie Mae and Freddie Mac, two government sponsored entities that buy and sell loans from mortgage lenders. These entities put strict caps on the loans they will buy, with single-family homes having a mortgage cap in the range of $360,000. With the booming real estate market, many areas such as San Diego do not come close to fitting into the conforming loan market since homes average in the $600,000 range.

2. Non-Conforming Loans Known as Jumbo Loans, these mortgages are written for loans that exceed the $360,000 cap mentioned previously. They tend to have slightly higher interest rates, but are readily available.

3. Bad Credit Loans In the mortgage industry, mortgage brokers often refer to a borrowers paper. This paper refers to people with less than stellar credit. B paper refers to relatively small problems, while D paper refers to bigger issues such as bankruptcy filings. The worse your paper, the more you can expect to pay in interest, points and down payment amounts. You need to carefully determine whether paying these extra penalties makes financial sense.

Interest Rates

With each of the above loans, youll have an option of going with a fixed interest rate or an adjustable rate. Fixed interest rates simply set a definitive interest rate that will be charged over the length of the loan. Adjustable rates typically start at a figure lower than fixed rates, but can be moved up to reflect changes in the cost of borrowing money. In many ways, you are betting whether interest rates will increase in the future.

For a great majority of people, basic mortgage loan options still suffice when it comes to borrowing money. Dont fret if you have problems qualifying for these loans. There are many other options on the market these days.

Author: Sergio Haros
Article Source: EzineArticles.com

Here are my mortgage rate predictions, trends, and forecasts for the rest of 2009, and a few months into 2010. When a homeowner gets the lowest interest rates they can, they are saving the most money possible. With mortgage refinancing and home loan modification on the rise, a lot of homeowners would benefit from having an idea of what to expect from interest rates. Here are my predictions, and how I made them:

-Right now 5.19% is the average mortgage rate for a typical homeowner and a fixed rate 30 year mortgage.

-Mortgage rates were as low as 4.69% for the same loan earlier in the year.

-I predict that in October of this year, 2009, mortgage rates will drop from 5.19% to their prior lows of 4.69% for a 30 year fixed rate home loan.

Why do I think mortgage rates will drop to 4.69? I think that the only reason that mortgage interest rates went up .5% to their current rates of 5.19%, is due to mortgage lenders and banks being overwhelmed by the amount of homeowners looking to take advantage of the low interest rates, and the Governments mortgage bailout plan. The combination of these two things quickly drew the interest of millions of homeowners who applied for a mortgage refinancing or modification.

My predictions reflect the fact that I think that around October of this year, 2009, the mortgage lenders and banks will be caught up with the existing home loan modification and refinancing applications. At this point, they will be looking for a new wave of homeowners who need a more affordable mortgage. The interest rates, I predict, will be lowered to their prior lows to spur interest in mortgage refinancing and home loan modification.

If a homeowner can, they should wait a little to see if the mortgage rates lower a little. However, if your home is at risk of being lost to foreclosure or mortgage default, take action now.

At my site I will teach you how to properly refinance or modify a home mortgage saving you thousands of dollars, or even your home. A lot of Greedy Mortgage Lenders will try to suck you dry if you let them. Learn the right way to refinance or modify your home loan at my site: http://www.refinancingcondo.com