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Answer 4 mortgage questions and get the best home loan for your needs

[May 25, 2011.]


Rather than zeroing in on today's mortgage rates, home mortgage borrowers should look at mortgage loan options and consider an overall financial plan. Comparing mortgage rates online can be useful, but remember that the rates you will pay are based on your individual circumstances, especially your credit score.

4 key home mortgage factors to consider

  1. How long do you plan to stay in the home? If you intend to own your home indefinitely, you will want to lock in a long-term, fixed-rate home mortgage in order to keep your mortgage payments consistent. If you know for certain that you will be selling your home within three to five years, you may want to look into an adjustable-rate mortgage (ARM) to take advantage of lower interest rates. Just make sure you can afford the worse-case scenario for your loan in the event that your plans change.

  2. How much cash do you have for a down payment? If you are short on cash, an FHA mortgage loan may be your best option. These loans require just 3.5 percent of the home price for a down payment. You will need to pay mortgage insurance for any loan if you make a down payment of less than 20 percent, so be sure to make room for those payments in your housing budget. Conventional loans typically require at least 5 percent to 10 percent for a down payment, although some borrowers with excellent credit may qualify for a loan with 3 percent down. Veterans can apply for 100 percent financing through the VA loan program.

  3. How much can you afford to pay each month? Before choosing a home mortgage, determine your comfort level with your housing payment. Don't rely on the lender to tell you how much to spend, because only you know how much you need to save each month or spend on items that do not show up on your credit report.

  4. How long would you like to have the loan? While the majority of borrowers lock in a fixed-rate home mortgage when rates are low, you can also choose whether you want to repay the loan over 30, 20 or 15 years. Generally, shorter term loans have a lower interest rate, so if you can afford the payments on a 15-year loan, you might want to consider the benefits of paying off your mortgage earlier and saving thousands of dollars in interest.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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