Mortgage Loan Programs Cont'd - There are also hybrids, or combinations of different mortgage programs, but beware of companies using an introductory period of a fixed rate to lure you into taking the loan. Some popular hybrids are: convertible ARM's, two-step mortgages, and graduated payment mortgages. Graduated payment mortgages start with a relatively low monthly payment and then gradually rise from there over the length of the loan. The advantage of this is that the borrower can qualify for a bigger loan.
When shopping for a loan, your best weapon is information. So, make sure to do your homework beforehand, especially when it comes to choosing a lender. One mistake homeowners make when refinancing is to automatically go to their current mortgage company for a loan. This might be detrimental, as their current company already has their business and might not be as compelled as a new company to provide them with the best deal.
The most important factor is to obtain quotes from all types of lenders: credit unions, mortgage banks, mortgage companies, and other financial institutions. Also, be sure when shopping, to obtain a Good Faith Estimate from each lender, including: a list of current rates, a quote of points converted to monetary value, all the pertinent fees and closing costs, and the down payment amount. Popular types of conventional loans, for those with proven credit history, include: Adjustable Rate Mortgages (ARM's), Fixed Rate Mortgages (FRM's), Home Equity Loans, Balloon Mortgages, and Cash Out Mortgages.
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