Mortgage experts say the many loan options available for homebuyers today, many of who wouldn’t otherwise be able to purchase, should be looked upon with caution. In the real estate market today there is literally a home for any buyer. However, that does not mean that everyone should buy a home.
Potential homebuyers should asses their financial situation before shopping for a home mortgage. Doing your homework first will save you money; more importantly finding the right mortgage will keep you out of financial hot water down the road. Key factors to consider when financing a home mortgage are will the potential homebuyers be able afford the mortgage payments over time, how much will the home appreciate, as well as how much risk is acceptable. The mortgage market today has many new loans; there are mortgage products for people of all incomes and credit ratings. Homeowners need to be careful, realistic with their spending habits, and have a backup plan should pitfalls arise that could lead to foreclosure.
The problem is picking the right mortgage loan; this can be tricky.
Until recently, potential homeowners had a choice of fixed interest rate, 30 or 15 year mortgages, and some adjustable rate mortgage loans (ARM). However, spurred on by increasing competition, not to mention the fact that almost half of Americans have lousy credit ratings, there has been an onslaught of new types of mortgage loans. Ordinarily, the high prices of homes today would keep many buyers out of the market. The mortgage industry has evolved and found ways to finance people that did not exist a decade ago. These new types of mortgage loans allow homeowners to make little or even zero down payments, they include interest only mortgage loans, and there are mortgages loans with variable interest rates, as well as loans with interest payment options. In spite of all the choices, most mortgage brokers say the traditional 15 or 30 year fixed interest rate mortgage loans are still the most popular.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
