Home mortgage rates are currently at their lowest point in history, according to the National Association of Mortgage Professionals. Due to the stricter underwriting guidelines that are in force, choosing the correct home mortgage to apply for is important in order to take advantage of these rates and avoid frustration.
A 30-year fixed-rate mortgage is a popular choice, especially among borrowers that intend to stay in their current residences for many years to come. For other borrowers, an adjustable-rate mortgage (ARM) can make sense if it is highly probable they will no longer own their residences in a year or two. This option works for people seeking to take out some of the equity from their residence via a cash-out refinance without trying to sell the home in the current difficult market. They would enjoy a lower interest rate and monthly payment than a 30-year fixed mortgage and could then sell the property before the rate adjusts. Popular ARM loans include â€œhybrid ARMs,â€ where the home mortgage rates are fixed for a period of one, three, five or even ten years before adjusting.
Another option is a shorter amortization period, such as a 15-year fixed loan instead of a 30-year fixed. This type of home mortgage has the benefit of a slightly lower interest rate and less total interest charged over the life of the loan, but the monthly payments will be higher. Homeowners seeking to build equity faster and own their properties free-and-clear might find this loan more attractive; however, in order to qualify for it, the household income must be greater than with a 30-year fixed.
One of the critical things to consider in qualifying for a home mortgage, besides credit history and income, is the property itself. Lenders scrutinize appraisal reports to ensure they are lending based on the true market value of the property. This means that some borrowers will be disappointed if their lender or appraiser bases the loan amount on a much lower property value than is the borrowerâ€™s opinion. For this reason, it is recommended to take an objective view of a propertyâ€™s value by researching sales prices of recently sold homes rather than the list prices of unsold homes.
Consumers searching for the best possible mortgage can get quotes from several different lenders and mortgage brokers to compare their options. Fees vary from lender to lender, and some offer special programs that are unavailable at other companies that might make qualifying easier. Although the number of mortgage lenders still in operation is significantly less than in years past, borrowers still have plenty of companies and mortgage brokers to choose from for their mortgage needs.