• 30 year fixed rate
• 15 year fixed rate
• ARM
• Balloon

Select the Right Loan and Fees

Many people who are considering financing a home assume their best option is a conventional 30-year, fixed-rate loan. However, there are many different loan programs available which may better meet your individual plans and goals. The following decisions will help you select the best choice;

• How long do you plan on keeping your loan?
• Will you be capable of making higher payments in the future?
• Do you expect rates to be higher or lower in the future?
• How long you intend to keep your loan may be the most important factor to make the best choice. A simple way to estimate the costs of a particular loan program in the first few years is to take the principal amount, multiply it by the interest rate and then add the cost of the origination and discount points. The following is an example for estimating the costs of a $100,000 mortgage with a 7.50% rate for two years.

  Est. Cost = (Loan amount x interest rate/12 x number of months) + points & origination fee
  Est. Cost = ($100,000 x 7.50%/12 x 24 months) + ($100,000 x 2.00%)
  Est. Cost = $15,000 + $2,000
  Est. Cost = $17,000
  

Rate and Point Options:
To compare the same loan program with different rate and discount point options a borrower will probably save the most money by paying more points if they are sure they will keep the mortgage for more than five years. Click here to view a sample rate and fee comparison for a loan amount of $100,000.

Loan Program Options:
If you think you may sell or refinance your home within three years, you may be better off getting an adjustable-rate mortgage. An adjustable rate loan has a low interest rate in the early years of the loan, while a fixed-rate loan stays constant at a higher rate. With an adjustable, you'll pay less for short-term ownership of your house. On the other hand, if you think you may keep the house more than 5 years, a predictable fixed-rate loan is probably a better choice. Click here to view a program comparison for a loan amount of $100,000. Please note it assumes that the ARM programs will make the maximum interest rate adjustments.

Loan Term Options:
If your primary goal is paying your mortgage off and building equity in you home you may want to consider a 15 or 20 year loan. The interest rate is typically about .375% lower for a 15 year loan versus a 30 year loan so you can save money on your interest payments as well. If you are not comfortable with a higher payment you may elect to obtain a 30 year loan then pay extra principal monthly when you can afford it. Click here to view a sample loan term comparison for a loan amount of $100,000.

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