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My Home Values Home Loan Department will guide you through choosing
the right mortgage for your needs. How long you plan on staying in the
house, your income and your outstanding debts are three of the major
factors that will detirmine what home loan is right for you. Home loans
are classified into two catagories: Conventional Home Loans and Government
Home Loans.
Coventional Home Loans are defined as any home loan that is
not funded or guaranteed by a government agency. Fixed-Rate Mortgages
and Adjustable-Rate Mortgages (ARMs) are the most common conventional
home loans.
Fixed-Rate Mortgages provide you with a home loan that has a
permenant interest rate for the life of the loan. In turn, this will
also make your home loan payments the same every month. You can get
a fixed-rate mortgage with a 10, 15, 20, 30, 40 or even 50 year payoff
term. The most common though are the 15, 20 and 30 year loans. Longer
term loans will have lower monthly mortgage payments but you will be
paying much more in interest than you would with a shorter term loan.
Shorter term home loans have higher monthly mortgage payments but cost
you less interest which allows you to earn equity on your home faster.
You can also build equity faster by paying more against your principal
than your regular mortgage payments every month. You will first want
to make sure that your mortgage company doesn't charge prepayment penalties
for paying off the principal faster.
The down payment on your home loan is an important factor also. If you
get a home loan with a low down payment you may be required by the mortgage
company to pay for Personal Mortgage Insurance (PMI) which will add
to your monthly expenses. Personal Mortgage Insurance is for the protection
of the lender from risk of loss. Most mortgage companies require a 20%
down payment in order to keep from having to pay for personal mortgage
insurance.
30-year fixed-rate mortgage loan pros and cons:
PROS:
Lower monthly payments.
Larger interest deduction.
Easier to qualify for. |
CONS:
Higher fixed interest rates.
For long term homeowners.... |
20-year fixed-rate mortgage loan pros and cons:
PROS:
Lower interest rate than a 30 year mortgage.
Builds home equity faster than a 30 year mortgage. |
CONS:
Higher monthly payments than a 30 year mortgage.
A lesser interest deduction than a 30 year mortgage. |
These home loans are for homeowners that can afford a higher monthly
payment in order to save on interest costs and build equity faster.
15-year fixed-rate mortgage loan pros and cons:
PROS:
Lower interest rate than a 20 year mortgage.
Builds home equity faster than a 20 year mortgage. |
CONS:
Higher monthly payments than a 20 year mortgage.
A lesser interest deduction than a 20 year mortgage. |
These home loans are for homeowners needing to take care of home loan
debts early in preparation for other debts to come like your kids education
or possible medical needs. These home loans are also common for those
homeowners that are nearing retirement and want to take care of the
mortgage first.
Adjustable-Rate Mortgages (ARMs) have an interest rate that is
changed over time depending on the markets rate. If the markets interest
rate goes up so does your interest rate and in turn your monthly payment.
If the markets interest rate goes down however, so does your interest
rate and monthly payment accordingly. ARMs are for homeowners that would
like an intially lower interest rate than a fixed-rate mortgage in order
to qualify for a larger loan. These home loans may also be beneficial
to homeowners that are planning to move soon or those that have a high
likelyhood of a substantial pay increase in the near future.
GOVERNMENT HOME LOANS:
FHA - Federal Housing
Administration
VA - US Department
of Veteran Affairs
RHS - Rural
Housing Service
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