Home Building - Choosing the Right Mortgage

There are many different types of mortgages available. When selecting the right mortgage, you must take into account your current financial situation and what you expect your financial situation will be in the future. You should also consider how many points you wish to pay and whether you wish to be tied into a set interest rate for the term of the loan or are willing to take a gamble and get an adjustable mortgage. We’ve listed a few of the more common types of mortgages below.

Fixed-Rate Mortgages offer an interest rate that will never change over the entire life of the loan. If you lock in a rate of 7 percent that calculates a payment of $1,150 per month, then you know that in 20 years you'll still be paying $1,150 per month. The only things that will change will be the property tax and any insurance payments that are included in your monthly payment.??

Adjustable-Rate Mortgages (ARM) have an interest rate that changes based on changing market rates and economic trends.

They usually offer an initial interest rate that is two to three percentage points lower than fixed-rate mortgages, but they don't offer the stability or assurance of a known mortgage payment in the years to come. If you don't expect to be in your home for many years, however, an ARM may be just what you need ??Balloon Mortgages offer an initial interest rate that is lower than fixed-rate mortgages. It keeps this low fixed rate for five to seven years and then requires a "balloon" payment. The balloon payment is the final payment of the loan and pays off the entire balance. Monthly payments are low because the payments for those first five to seven years are amortized at a low interest rate over the total length of the loan. If you plan on either selling your home, paying it off, or refinancing it before the balloon payment is due, then this type of mortgage may be right for you.

Government Housing Loans help lower the cost of mortgages so that more people can afford to own their own home. There are three government agencies that insure mortgages. The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development, the Veterans Administration (VA), and the Rural Housing Service (RHS), which is a branch of the U.S. Department of Agriculture. Only approved lenders can offer these loans, and there are required standards that the property has to meet in order to qualify.