Finding your dream home is one of the best things in life, but that dream can turn sour when it comes to the practical application of a mortgage. Though financial institutions have cracked down on lending, there are plenty of choices to find the mortgage solution right for you.

The following is a brief overview of each mortgage loan and how they work.

  • PMI. Private mortgage Insurance loans require a lower down payment, but recoup the lender’s risk with a premium insurance payment. This type of loan can be generated with less than 20 % down for qualified buyers

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  • ARMs. The adjustable rate mortgage is based on an index for short term loans and a margin limited by an interest rate and payment cap which causes the buyer’s monthly payment to fluctuate, or adjust, to the loan amortization. The ARM may be set for 2 to 5 years before it adjusts.
  • Bi-Weekly Mortgages. This plan allows the buyer to make payments every 2 weeks to bring down the total amount of interest attached to the loan.
  • GPM. The Graduated Payment Mortgage allows the buyer to receive a competitive initial interest rate with the payments to increase accordingly to a fixed rate within a specified amount of time.
  • FHA. In cooperation with the Department of Housing and Urban development, (HUD) and the Federal Housing Administration, (FHA), a first time buyer may purchase a property with 2 to 5 % of the purchase price as down payment. The HUD and FHA loans are not lenders, but, rather guarantors of the loan should the buyer default. However, due to the minimal down payment, the buyer must buy an MIP, (mortgage insurance premium).

The adjustable loan offers the best interest rate at the time of signing, in accordance with the client’s credit score. However, in an unstable economy, those low rates may jump to double their value plunging the home owner into a foreclosure situation.

Talk to your real estate professional about the terms for a 30 to 40 year fixed loan. These loans are often higher monthly payments than the adjustable mortgage, but the safety precaution is that you will always know what your payments will be.

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