Comparing Mortgage Programs

In today's real estate financing marketplace there are a variety of home loan programs to choose from. From low money down FHA loans, VA mortgages , and USDA rural housing loans to non-conforming jumbo loan programs it can be a bit overwhelming when trying to select the right product. Luckily there are plenty of qualified mortgage professionals who are ready, willing, and able to help you navigate the waters. Prior to contacting a mortgage lender or broker, take a few minutes to answer the following questions:

1. How much money do you have to put down? Or, in the case of a refinance, how much equity do you have in the home? The answers to these questions will immediately narrow down you choices. If the answer is less than 5% you are probably going to be looking at a government backed product (ie a VA, FHA or a USDA loan).

2. What is your credit score and that of the co-borrower? If the scores are above 740 you may be able to qualify for some of the best rates out there. If your score is below 620-640 your options are going to be very, very limited. American Financial Resources offers a low credit mortgage product for people with scores down to 600.

3. How long are you planning on being in the home? If the answer is less than 7-10 years, you may want to consider an adjustable rate mortgage. Adjustable rate mortgages have an introductory rate which is fixed for a set period of years prior to adjusting up or down based upon a loan's margin and the index that the loan is tied too. ARMs do carry added risk so be sure to weigh the pros and cons before moving forward.

4. Realistically, what can you afford to pay every month? If we learned anything in the recent housing crisis it should have been that we need to try to do a better job living within our means. Banks have tightened their guidelines which helps reduce the risk of high debt-to-income ratios.

5. What is the current state of your real estate market? Housing prices in many parts of the country are slowly coming back but there are plenty of communities where prices are still in freefall. If you are planning on putting down 5-10% on a 5/1 ARM and the value of your home drops 10-15% over the next 3-5 years, you may find yourself upside down and unable to refinance out of the adjustable rate mortgage.

Once you have answered these questions you can engage a mortgage professional and let them know your goals and lay out any concerns you may have. When selecting a mortgage lender or broker, always do a little homework by checking the company's standing with the Better Business Bureau and/or their licensing authority. Best of luck finding a great deal on your next home loan.

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