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which mortgage is right for me?

Choosing the right mortgage is a difficult choice. Should you go with a fixed rate or an adjustable rate? Is a 15 year or a 30 year mortgage better for me? If you already have a home, is a refinance cashout or a home equity loan better? How about a debt consolidation loan? What is a jumbo loan?

We hope to answer some or all of those questions for you in words that you can understand.

Interest Rates (Fixed vs Adjustable)
First, a fixed rate mortgage is a mortgage where the interest rate stays the same over the life of the mortgage. Going with a fixed mortgage is ideal in an economy where the rates are low such as right now. Adjustable interest rates are more ideal in an economy where the interest rate is higher and can potentially go down in the near future.

Length of Mortgage (15 years vs 30 years)
To keep it simple, the longer the length of your mortgage, the more money you spend on the loan. Even though the monthly payment for a 30 year mortgage is lower than a 15 year mortgage, by the end of the 30 years, you will have paid almost twice as much for the house than if you would have with a 15 year mortgage.

Buying a Home
There are a number of different types of mortgages for first time home buyers. With the increasing price of homes, there are also federal assisted loans that help lower income families afford to pay for a house. Some of these special first time home buying programs are supported by the following companies:

  • Fannie Mae : This is a government chartered company that help middle income families become homeowners. The Fannie Mae mortgage requires a 3 percent down payment on either a 25 year or 30 year fixed mortgage. Anyone instead in borrowing are required to take a home buyer education class to qualify for the Fannie Mae mortgage.
  • Federal Housing Administration : The FHA is a government agency of the Department of Housing and Urban Development. They insure residential mortgage loans that are made by private lenders. The FHA insurance allows you to buy a home with a very low down payment of 3-5 percent of the lower of the appraised value or the home sales price.
  • Veterans Administration : This administration guarantees any veterans that qualify to buy a house up to $203,000 with zero down payment. Of course these days, it is rather difficult to find a home near $200,000; at least in California. If you need more information, check out your state's VA website.
  • Rural Housing Service : This government agency is apart of the Department of Agriculture who help provide loans to qualified borrowers who are interested in buying property in rural areas. This program is intended for low to middle income families living in rural areas and small towns. They offer low interest rate loans with little or no down payment on the property.
  • State and local government programs : With the rising cost of homes, a lot of state and local housing agencies have sponsored programs to assist qualified first-time home buyers. The programs offer mortgages with low down payments as well as low interest rates. Try checking with your local state or local housing agency.

What is a Jumbo Loan? :
A jumbo loan in 2004 is any loan amount $333,700 or more. Jumbo loans require you to put down a higher down payment and pay a higher interest rate.