The best mortgage for you

October 4, 2011 –Choosing the right mortgage program may seem overwhelming. After all, there are plenty of programs that can confuse even the most sophisticated of buyers.

Your mortgage should be an integral part of your overall financial picture. It should fit you as comfortably as your new home, taking into consideration your current situation, goals, and personal and financial plans for the future.

It’s always wise to go over your options with a professional mortgage representative, but here’s a handy guide to get you started.

30-Year Fixed Rate Mortgage    
Appropriate for buyers who plan to live in property more than 10 years and like total payment stability
Program characteristics: interest rate and monthly payment remain the same for 30 years

10/1-Year Adjustable Rate Mortgage
Appropriate for buyers who plan to live in property more than 10 years; like initial payment stability but can accept later changes; OR plan to move within 10 years Program characteristics: interest rate and monthly payment remain the same for 10 years; starting with 11th year, interest rate adjusts yearly for the remainder of the loan

7/23 (2-Step) Adjustable Rate Mortgage
Appropriate for buyers who plan to live in property more than 10 years; can tolerate one payment adjustment; OR plan to move within 7 years
Program characteristics: interest rate and monthly payment remain the same for 7 years; on the 8th year, interest rate adjusted to reflect prevailing interest rates; resulting payment will remain the same for the remainder of the loan

7/1-Year Adjustable Rate Mortgage
Appropriate for buyers who plan to live in property more than 7 years; like initial payment stability; can accept later changes; OR plan to move within 7 years
Program characteristics: interest rate and monthly payment remain the same for 7 years; starting the 8th year, interest rate adjusted every year so payment is subject to change every year for the remainder of the loan

7-Year Balloon Mortgage
Appropriate for buyers who plan to live in property more than 7 years; are willing to refinance at prevailing market rates; OR plan to move within 7 years; like payment stability
Program characteristics: interest rate and monthly payment remain the same for 7 years; at the end of 7 years, loan is due in full; borrower must refinance to new loan at prevailing interest rates

5/5 & 5/1 Year Adjustable Rate Mortgages
Appropriate for buyers who plan to live in property more than 5 years; can tolerate one payment adjustment; OR plan to move within 5 years
Program characteristics: interest rate and monthly payment remain the same for 5 years; starting the 6th year, interest rate adjusted every 5 years for 5/5 ARM and every year for 5/1 ARM

5-Year Balloon Mortgage
Appropriate for buyers who plan to live in property more than 5 years; are willing to refinance at prevailing market rates; OR plan to move within 5 years; like payment stability
Program characteristics: interest rate and monthly payment remain the same for 5 years; at the end of 5 years, loan is due in full; borrower must refinance into new loan at prevailing interest rates

3/3 & 3/1 Year Adjustable Rate Mortgage
Appropriate for buyers who plan to live in property more than 3 years; like initial payment stability; can accept later changes; OR plan to move within 3 years
Program characteristics: interest rate and monthly payment remain the same for 3 years; starting 4th year, interest rate adjusted every 3 years for 3/3 ARM or every year for 3/1 ARM

1 Year Adjustable Rate Mortgage
Appropriate for buyers who want to take advantage of lowest rate possible; OR are willing to accept yearly payment changes
Program characteristics: interest rate adjusted every year so monthly payment is subject to change every year for entire 30-year loan

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