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Which type of mortgage loan is right for you?
There isn't a single or simple answer to this question. The right type of mortgage for you depends
on many different factors:
- Your current financial picture
- How you expect your finances to change
- How long you intend to keep your home
- How comfortable you are with your mortgage payment changing
For example, a 15-year fixed rate mortgage can save you many thousands of dollars in interest
payments over the life of the loan, but your monthly payments will be higher. An adjustable rate mortgage may get you started
with a lower monthly payment than a fixed rate mortgage, but your payments could get higher when the interest rate changes.
The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences
frankly with a mortgage professional.
» Conventional and Jumbo
Loans
Conventional loans are secured by government sponsored entities or GSEs such as Fannie Mae and
Freddie Mac. Conventional loans can be made to purchase or refinance homes with first and second mortgages on single family to
four family homes.
» Sub-Prime Loans
If you have bad credit, you may not qualify for a conventional loan or a low down payment loan
offered by FHA and VA. In this case, you may consider a sub-prime mortgage. Because of the higher risk associated with lending
to borrowers that have a poor credit history, sub-prime loans typically require a larger down payment and a higher interest
rate.
» FHA Single Family Mortgage
Insurance Program
FHA's mortgage insurance programs help low and moderate income families become homeowners by
lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages mortgage companies to make loans to
otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements, by
protecting the mortgage company against loan default on mortgages for properties that meet certain minimum
requirements--including manufactured homes, single-family and multifamily properties, and some health-related facilities.
» VA Loans
More than 29 million veterans and service personnel are eligible for VA financing. Even though
many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using
remaining or restored loan entitlement.
» Second Mortgages and Home
Equity Lines of Credit
Home Equity Credit Line of Credit (HELOC)
If you need to borrow money, home equity lines may be one useful source of credit. Initially at least, they may provide
you with large amounts of cash at relatively low interest rates and they may provide you with certain tax advantages
unavailable with other kinds of loans. At the same time, home equity lines of credit require you to use your home as
collateral for the loan. This may put your home at risk if you are late or cannot make your monthly payments.
» Fixed Rate Mortgages
The most common type of mortgage program where your monthly payments for interest and principal
never change. Property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable.
Fixed rate mortgages are available for 30 years, 20 years, 15 years and even 10 years. There are also "biweekly" mortgages,
which shorten the loan by calling for half the monthly payment every two weeks. (Since there are 52 weeks in a year, you make
26 payments, or 13 "months" worth, every year.)
» Adjustable Rate Mortgages (ARMs)
These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed
rate mortgage, and could allow you to buy a more expensive home. However, the interest rate changes at specified intervals
(for example, every year) depending on changing market conditions; if interest rates go up, your monthly mortgage payment will
go up, too. However, if rates go down, your mortgage payment will drop also.
» Balloon Mortgages
Balloon loans are short term mortgages that have some features of a fixed rate mortgage. The loans
provide a level payment feature during the term of the loan, but as opposed to the 30 year fixed rate mortgage, balloon loans
do not fully amortize over the original term. Balloon loans can have many types of maturities, but most balloons that are
first mortgages have a term of 5 to 7 years.
» Graduated Payment Mortgage (GPM)
The GPM is another alternative to the conventional adjustable rate mortgage, and is making a
comeback as borrowers and mortgage companies seek alternatives to assist in qualify for home financing. Unlike an ARM, GPMs
have a fixed note rate and payment schedule. With a GPM the payments are usually fixed for one year at a time. Each year for
five years the payments graduate at 7.5% - 12.5% of the previous years payment.
» Interest Rate Buy Downs
The most common buy down is the 2-1 buy down. In the past, for a buyer to secure a 2-1 buy down
they would pay 3 points above current market points in order to pay a below market interest rate during the first two years of
the loan. At the end of the two years they would then pay the old market rate for the remaining term.
» Reverse Mortgages
A reverse mortgage is a special type of loan made to older homeowners that enables them to convert
the equity in their home to cash to finance living expenses, home improvements, in home health care, or other needs. A reverse
mortgage is a sophisticated financial planning tool that enables seniors to stay in their home while maintaining or improving
their standard of living without taking on a monthly mortgage payment.
» Commercial Loans
Loan programs for commercial and investment properties are underwritten on a case by case basis.
Every loan application is unique and evaluated on its own merits.
We offer many other loan options. Give us a call and we will be happy to help you determine
which loan is right for you. Boise Office: 208-229-2939
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