Compare Mortgages at Quicken Loans
Choosing a Mortgage
Choosing among the many houses that may be available is hard enough--then you need to make a choice from the myriad of mortgages that are offered in today's market. So many decisions! Take heart, though, since although there are literally hundreds of different mortgages available, they all fall into only a few basic varieties. Some may fit perfectly into your situation, others may be unwise or unattainable. By narrowing your choices, the process of picking the right mortgage becomes much easier.
Fixed Rate or Adjustable
One of your first decisions should be between a fixed rate (the interest rate remains constant through the life of the mortgage) or an adjustable (the interest rate is adjusted--either up or down--at specified times during the mortgage term). Adjustable Rate Mortgages (ARMs) will have an initial interest rate lower than fixed rates but will adjust upward (unless rates really fall!) usually after the first year. They may be a good choice if you are sure that you will not be owning the home for an extended period (more than 5-7 years) of time.
Terms: 15, 20 or 30 years
You will probably want to shoot for the shortest term that is comfortable (and for which you will qualify). The interest savings are enormous as the term decreases. Always make a comparison between a 15 year term payment and a 30 year term payment. The difference is often surprisingly smaller than anticipated. The savings over the term of the loan, however, can be substantial. For example, comparing a 15 year term to a 30 year term, $100,000 mortgage at an 8 1/2% fixed rate yields the following results.
HINT: If you can't qualify for a shorter term try to add at least the amount of 1 additional payment per year--this will knock nearly 10 years off a 30 year loan.
Common Loan Types: Conventional, FHA, VA and "No-Document"
Conventional: A "traditional" mortgage, not directly insured by the Federal Government. Most
conventional loans under $275,000 are administered through Fannie Mae or Freddie Mac (private corporations but
regulated by the government). Those loans over that amount are designated "jumbo loans" and are funded
by the private investment market.
Points or No Points
A large component of your mortgage decision has to do with one of the first charges associated with your loan--even before you make your first payment--the "points" attached to the mortgage. A point is 1% of the loan amount, paid to the lender or the mortgage broker at closing (in cash). For more information on paying (or not paying) points, see the article "Should I Pay Points?" written by Randy Johnson, author of the best-selling book on mortgages How to Save Thousands of Dollars on Your Home Mortgage.
Once you have a general idea of the type of mortgage that best suits your situation, the next step is to begin to make comparisons among the lenders that are available. Weekend newspapers will often have the rates of individual local lenders posted in their Real Estate section. To get the specifics of each lender's rate and term, you can contact the bank or mortgage company directly. Another source is a mortgage broker in your area, who will often represent a number of sources of mortgage funds and can assist you in your choice. A third source, and the most recent, is an online source such as Quicken Loans, where you can submit a single, quick online loan request form and get up to 4 loan offers tailored to your needs. Click here for more information.
There are options for those who have had credit problems
and still want to own a home. See the section
devoted to that topic.