Types of Mortgages

The most common mortgages last for 15 or 30 years. Several types of mortgages are available:

Fixed rate mortgages carry the same interest rate during the life of the loan. Your basic mortgage payment is always the same. (If your lender collects monthly property tax and insurance payments for you, your fixed payment may vary from year to year.) Fifteen-year mortgages have much higher monthly payments.

Variable rate or Adjustable rate mortgages often allow you to qualify for a smaller payment and lower introductory rate, but this does not make them a good choice. Your monthly payment can increase if interest rates rise. Learn how high the interest rate can go, how often the interest rate may change and be sure you can afford a higher payment.

Federal Housing Administration (FHA) loans. If you have damaged credit, FHA loans are easier to qualify for and usually have lower downpayment requirements. You may even be able to get a loan if you've been through bankruptcy. To find out more ask John by clicking HERE.

Danger: Non-Traditional Loans

Beware of risky "exotic" mortgages. These nontraditional loans are not appropriate for the majority of borrowers:

Interest-only loans seem attractive because they let you make a lower interest-only payment during a temporary introductory period. Unfortunately, this doesn't repay the original loan amount (principal) and your payments will shoot up dramatically when the intro period ends.

Zero-down loans don't require a downpayment, which means that when you sell or refinance you may lose money if your home has not increased (appreciated) in value. Many homebuyers have actually ended up owing money when they sell because the value of their homes has gone down.  These have become more rare. 

2/28 or 3/27 loans. For 2 or 3 years, these loans start with a low interest rate that jumps to a much higher rate, which may adjust every six months. The higher-and-higher payments can put you at risk of losing your home.

Subprime loans. Subprime lenders charge higher rates and fees to people with damaged credit, and often target lower income, senior or minority borrowers. These loans often contain unfair or deceptive (predatory) terms, such as pre-payment penalties (hefty fees for paying the loan off early).