Selecting the Best Mortgage Program For You

There are many factors to consider when deciding how to finance your Contry home. Term, points, and rate are only a few of the variables to consider. One of our qualified finance partners can help you determine the loan that is best for you and your budget.

To familiarize yourself with the new home lending process, consider the following points.

A Mortgage Is More Than An Interest Rate

Mortgage packages may include other variables in addition to the interest rate. These variables may include points, which are prepaid interest assessed by the lender at settlement. Hence, it may be less expensive to pay a higher interest rate with fewer points than to pay a lower interest rate and more points.

But the most important features to consider are the types and the terms of mortgage such as whether it is adjustable, fixed or a hybrid of the two, and what the length of the term is (i.e., 1, 2, 7, 15 or 30 years).

Fixed Rate Versus Adjustable Rate

The two most common types of mortgages are fixed rate and adjustable rate mortgages (ARMS). The interest rate with a fixed rate mortgage remains the same for the life of the loan. With ARMS, the rate varies according to movements in the financial markets.

Other Mortgage Types

Some mortgages offer fixed rates for a period of time, and then adjust the interest rate later to fit market conditions. While they usually offer a lower market rate to begin with, the interest rate may eventually rise or fall.

A "Builder/Lender Buy Down" gives the homebuyer an initially discounted interest rate which gradually increases to an agreed upon fixed rate over a certain period of time. "Convertible" mortgages offer the option to change the mortgage type after a specified period of time. This allows you to have a lower mortgage rate, then to "catch up" to your future higher income with a higher rate later.

15-Year Versus 30-Year Mortgages

15-year mortgages allow homeowners to own their own home in time for significantly lower total interest costs; however a 30-year mortgage has lower monthly payments. If you plan to own your home for a long period of time, it may be wise to consider a 15-year term. However, if you anticipate that your home is likely a transitional residence, then a 30-year term may be the best bet.

Which Mortgage Is Best For You?

First, compare the APR (annual percentage rate) of different mortgages. The APR indicates the "effective rate of interest" paid per year, including points and other charges, and spreads them over the life of the loan. Next, compare points and other fees. Finally, analyzing it allows prepayment without a penalty. If it's an ARM, compare yearly and "life of loan" caps. Then assess the payment schedule and determine what best fits your present and future needs.