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Mortgage Education FSMC - First Mortgages Fixed-Rate Mortgage Loans If you plan to stay in your house for a long time, your mortgage rate is probably a big concern. Because your interest rate stays the same throughout the entire life of your loan, a fixed-rate loan ensures that there are no surprises. Fixed-rate mortgages are available in a variety of repayment terms, with 15, 20, and 30 years the most common. 30-Year Fixed-Rate Mortgage Loans With the 30-year fixed-rate you will be able to keep your payments down by making them over an extended time period of 30 years. This loan is the easiest fixed-rate to qualify for and provides the maximum interest deduction for taxes. If you are planning to stay in your home for a long time & would like to have the extra money for other purposes this type of loan is your best bet. 20-Year Fixed-Rate Mortgage Loans The benefit to the 20-year fixed-rate over the 30-year is that not only do you become debt free 10 years sooner but the interest rate is often much lower. This mortgage amortizes principal and interest over 20 years & may save a considerable amount of total interest in the long run but the monthly payments will overall be much higher than the 30-year fixed-rate. 15-Year Fixed-Rate Mortgage Loans The 15-year fixed rate has the lowest interest out of the fixed-rates and will save you a significant amount of interest. Since you would be paying off the mortgage quicker than the other fixed-rate loans, you will build up equity in your home a lot sooner. This is an ideal loan for someone who is approaching other big expenses such as college tuition for their kids or their own retirement. Balloon Loans Balloon loans are attractive because they offer a lower interest rate for a short term financing period. (usually 5, 7 or 10 years) At the end of the term you will be required to either pay off the outstanding balance in one lump sum or you can refinance the loan. If you choose to get a balloon loan make sure that you know all the conditions that apply for refinancing. Most people who chose to get a balloon loan plan to sell or refinance their home within a few years and want a fixed, low payment. If you don't think you can meet the refinancing conditions or you think the balloon term may be up before you are ready to move, this is probably not the type of loan for you. Affordable Housing Loans These loans are for households of low to modest means. For qualifying families, Fannie Mae, in cooperation with housing providers, can help with high down payments, closing costs & housing expenses by offering flexible underwriting ratios that allow you to use more of your monthly income toward housing costs. These loans require a smaller down payment and a lower closing cost than normal mortgage loans. Generally, you are eligible if your household income is no more than 100% of your area median income. Fannie Mae's Community Home Buyer's Program Æ This program offers financing to low and moderate income home buyers with good credit but who may not qualify for home financing based on traditional lending criteria. 3/2 Option Æ This option makes it easier to accumulate funds for your down payment by
offering a 3% down payment instead of 5% that is usually required. The Fannie 97 Æ This type of loan is ideal for someone who has enough money for their monthly mortgage payments but doesn't have immediate access to cash for FannieNeighbors Æ FannieNeighbors removes the income limit if you are purchasing a home within a designated central city or eligible census tract. |
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