Let the Mortgage Hunt Begin

By Debbie Wilson
Loan Page Columnist

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New home loans come in many shapes and sizes. But before you can decide which mortgage loan makes the most sense for you, you must first understand the benefits of each and how they fit into your current financial situation.

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Despite the fact that there are multitudes of mortgage loan options, choosing the right one doesn't have to be a painful, stressful process. Basically, there are three types of mortgage loans: fixed-rate mortgages, adjustable-rate mortgages, and combination-rate mortgages.

Fixed-Rate Mortgage Loan Option

Fixed-rate mortgages come in 15-, 20-, and 30-year terms. In this type of mortgage loan, the interest rate and monthly payment remains the same for the entire term of the loan. It is the most widely accepted new home loan and works best if you plan to live in your home more than 5 years, like stable mortgage payments, and think your future income and spending will remain constant.

Adjustable-Rate Mortgage Loan Option

Adjustable-rate mortgages (ARM's) tend to have low starting interest rates, but increase either monthly or yearly thereafter. The interest rate is adjusted based on a pre-selected index, usually the one-year Treasury bill. This type of mortgage works best if you plan to stay in your home less than 5 years, can afford monthly payment increases, and think your income will increase in the future.

Combination-Rate Mortgage Loan Option

This type of mortgage might be the best of both worlds, since it starts with a fixed rate for 5 years, then moves to a variable rate after that. The variable rate might be for a specified term or might adjust on a regular, long-term interval.

Ultimately, the new home loan you choose should fit your current financial situation and long-term goals. Only then will you fully realize your dream of owning that special place you'll call home.

About the Author

Debbie Wilson owns and operates a lakeside resort, managing all aspects of operations, including marketing and promotion. Her previous experience includes management and profitability consulting for a national healthcare company. In this capacity, she oversaw a five-state operation, utilizing her extensive knowledge of healthcare billing, A/R management, and human resources. Debbie holds a B.A. in Business Management with a minor in Physical Education.

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