How Do I Know Which Mortgage Program To Use?

Applying for a home loan can be a daunting task. The first step is to choose an experienced loan officer you trust. Get referrals from family and friends. Real estate agents are also a good source of information.

It is recommended that you interview three or four loan officers before deciding on the best person for the job. There are loan officers who work for one lender exclusively and other loan officers who broker many different lenders’ products.

Types of Loans

A professional loan officer will ask you financial and personal questions before recommending the best loan option for your unique situation. Below are the main types of loan products available.

Fixed-Rate Mortgages

As the name suggests, a fixed-rate mortgage has a stable interest rate that doesn’t change throughout the life of the loan. This popular loan product is chosen by many buyers because of its predictability. While payments may vary due to rising prices for taxes or insurance premiums included in your payment, the principal and interest amounts remain steady.

Fixed-rate mortgages typically have terms of 15 or 30 years. Some lenders offer other options such as 20 or 25-year terms. The benefit of a shorter-term period is that you pay less interest as a borrower over the life of the loan, essentially reducing the cost of the loan. The downside of a short-term loan is that the payment will be higher.

Adjustable-Rate Mortgages

An adjustable-rate mortgage (ARM) is a mortgage that allows the interest rate to adjust on set dates based on how the economy does. Typically, the interest rate is determined by a certain economic index. Many first-time homebuyers select an ARM because they usually have low teaser rates that are set for a year or longer before the rate adjusts.

This type of loan represents a higher risk proposition since the rate and payment can increase in the future. Some ARMs have caps on the rate so that borrowers can rest assured the payment will not go above a certain level. The devil is definitely in the details on these loans, so you must be sure you understand how high the interest rate can rise and if you can manage that payment without undue hardship.

Jumbo Loans

Jumbo loans exceed conforming loan amounts and change regularly. In 2019, any single-family home loan for $484,350 or higher is considered a jumbo loan. Due to the higher risk associated with these larger loans, extensive documentation is typically required from borrowers.

Jumbo interest rates are higher than rates for other loans. Many borrowers wait and save a larger down payment so the loan amount falls below the jumbo loan figure as a way to save money and qualify for a conforming loan.

It is very important to partner with a professional loan officer who can give you good advice. Obtaining the right home loan is crucial for guaranteeing your financial health.

Evolve Bank & Trust Home Loan Centers (HLCs) are not full service branch locations of Evolve Bank & Trust. These HLCs do not engage in general banking transactions, such as deposits or payments, and only provide Residential Mortgage Loans. Equal Housing Lender. All loans subject to credit approval. Corporate NMLS# 509256