Choosing the right mortgage for you
Now more than ever, choosing the right mortgage loan for you is the most important part of the home ownership puzzle. Although there are many different mortgages available, they all fit into only a few basic varieties. Some may be a good fit for you, while some may put you into a very unfavorable financial position. First Fidelity Mortgage will meet with you to discuss your current financial situation, what your goals are and where you want to be financially in the future to determine the best course of action in purchasing your next or first home.
Fixed Rate or Adjustable?
One of your first decisions should be between a fixed rate or an adjustable rate mortgage. Adjustable Rate Mortgages (ARMs) will initially offer a lower interest rate, which is a very attractive option, and will fluctuate with market conditions, usually after the first year. If you plan to own the home for a short period of time (not more than five years), then an ARM may be a good option. However, ARMs can be risky because your rate (and therefore your monthly payment) may increase, depending on the market. With a fixed rate mortgage, you are guaranteed the same rate (the same monthly payment) for the life of your mortgage. A fixed rate mortgage will not ever surprise you.
Common Loan Types
A traditional mortgage, not directly insured by the Federal Housing Administration or (FHA) or guaranteed by the Department of Veteranís Affairs (VA) Most conventional loans under $417,000 are administered through Fannie Mae or Freddie Mac, which are private corporations regulated by the Federal Government. Loans over that amount are designated jumbo loans and are funded by the private investment market. Conventional is the most common mortgage type.
Insured by, but not funded by the Federal Housing Administration (FHA). The FHA is a division of the U.S. Department of Housing and Urban Development (HUD) and is designed for, generally, low- and middle-income borrowers and many first-time homebuyers. There are, however, limits which vary from county to county on the maximum loan amount.
VA loans are insured by the U.S. Department of Veterans Affairs and are available to active, reservists and veterans of the United States Armed Forces. The VA insures, but does not fund 15- and 30-year fixed and one-year adjustable mortgages with lower down payment requirements (as low as zero down) and somewhat lenient qualifying ratios. VA Loans can be used for purchase or refinance.