How to choose the best mortgage for me?

A popular trend for Americans is to seek low rate home loans especially those who are first time homebuyers. Sellers are also getting the message and responding by reducing the asking price. There is also recent drop in mortgage interest rates that is encouraging the first time homebuyers to start applying for mortgage loans. Following are the various mortgage loan options available:

Fixed rate mortgage:

• 30 Year Fixed Rate ? the interest rate is fixed for 30 years and the mortgage is fully amortized in 30 years if the amount payment schedule is followed.
• 20 Year Fixed Rate – the interest rate is fixed for 20 years and the mortgage is fully amortized in 20 years if the amount payment schedule is followed.
• 15 Year Fixed Rate – the interest rate is fixed for 15 years and the mortgage is fully amortized in 15 years if the amount payment schedule is followed.
• 10 Year Fixed Rate – the interest rate is fixed for 10 years and the mortgage is fully amortized in 10 years if the amount payment schedule is followed.

Fixed Rate Balloon Mortgage

7/23 Conforming Mortgage? rate is fixed for 7 years and then converts to a new fixed rate for the remaining 23 years. The new rate is based on the Fennie Mae net yield index and is added to a predetermined margin. Converting to the new rate is only permitted if the prescribed conditions are met and if not met, then the loan is due and payable to the lender as a balloon loan. The loan is amortized for 30 years if the normal payment schedule is followed.

5/25 Conforming Mortgage ? rate is fixed for 5 years and then converts to a new fixed rate for the remaining 25 years. The new rate is based on the Fennie Mae net yield index and is added to a predetermined margin. Converting to the new rate is only permitted if the prescribed conditions are met and if not met, then the loan is due and payable to the lender as a balloon loan. The loan is amortized for 30 years if the normal payment schedule is followed.

30/15 (30 due in 16)- the rate is fixed for 15 years and the payment is amortized over 30 years to facilitate lower monthly payments. This loan is due and payable as a balloon loan at the end of 15 years.

Intermediate A R M?s:

10/1 ARM?s ? the rate is fixed for 10 years after which in the 11th. year the loan becomes an adjustable rate. The adjustable is tied to the treasury index of 1 year and is added to a predetermined margin to arrive at new monthly rate. The margin, life cap and periodic caps of ARM will be in the 11th.year. The loan is fully amortized in 30 years if the normal payment schedule is followed.

7/1 ARM?s ? the rate is fixed for 7 years after which in the 8th. year the loan becomes an adjustable rate. The adjustable is tied to the treasury index of 1 year and is added to a predetermined margin to arrive at new monthly rate. The margin, life cap and periodic caps of ARM will be in the 8th.year. The loan is fully amortized in 30 years if the normal payment schedule is followed.

5/1 ARM?s ? the rate is fixed for 5 years after which in the 6th. year the loan becomes an adjustable rate. The adjustable is tied to the treasury index of 1 year and is added to a predetermined margin to arrive at new monthly rate. The margin, life cap and periodic caps of ARM will be in the 6th.year. The loan is fully amortized in 30 years if the normal payment schedule is followed.

3/1 ARM?s ? the rate is fixed for 3 years after which in the 4th. year the loan becomes an adjustable rate. The adjustable is tied to the treasury index of 1 year and is added to a predetermined margin to arrive at new monthly rate. The margin, life cap and periodic caps of ARM will be in the 4th.year. The loan is fully amortized in 30 years if the normal payment schedule is followed.