Know More than Mortgage Interest Rates

By Karen Lawson Columnist

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Falling home prices and reasonable interest rates are providing some great deals for buyers. If you're looking for a new home loan, you can choose from a variety of mortgage loan options that can meet your budget, lifestyle, and future plans.

If you're buying a starter home and are planning to move within a few years, a low initial interest rate can help you save. If you're buying a home you plan to keep, the security of a fixed rate mortgage helps you to build equity while providing a stable monthly principle and interest (P&I) payment.

Alphabet Soup and Your New Home Loan

Don't be confused by the strings of letters commonly used in the mortgage industry. You'll encounter terms such as ARM (adjustable rate mortgage,) FRM (fixed rate mortgage) GPM (Graduated Payment Mortgage). Depending on your needs, your lender can show you a wide array of mortgage loans that can help you get into the home you want. It's important to remember that mortgage loans are secured by the real property you're buying. It can be easy to get excited about finding the home you want, and sign your mortgage papers without completely understanding the terms of your new home loan. Please keep in mind that your mortgage is a binding contract, and that your mortgage payments are likely the largest check you'll write each month. Getting in "over your head" with too large a mortgage, or a mortgage interest rate that can fluctuate beyond your comfort zone can impact your household budget and credit rating. Make sure that you completely understand the terms of your new home loan. Mortgage interest rates are certainly an important consideration, but you'll also want to know if, how, and when your new home loan payments can adjust.

About the Author
Karen Lawson is a freelance writer with extensive experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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