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The things that can affect which type of mortgage option is right for you largely depend on the homebuyer. There are different types of low down payment and no down payment mortgages. Some mortgage loans are more suitable for specific types of homes. Distressed homes, for example, are best paired with an FHA 203k renovation loan. This type of mortgage loan has structured funds for repairs.

Of all the mortgage options available, fixed-rate loans are the safest. In the days of subprime lending by predatory lenders, many borrowers fell prey to overwhelming debt. A fixed-rate mortgage loan is safer for many homebuyers; there is no confusion about monthly payments and interest.

Compared to an ARM, a fixed-rate mortgage is also much easier to calculate. The most familiar of these is the conventional 30-year-old. Home buyers typically make a 10% to 20% down payment with a fixed interest rate. FHA loan products have a 3.5% deposit.

Conventional loans carry an insurance premium from the lender when less than 20% is deposited. This premium called PMI, or private mortgage insurance, protects lenders in the event of a borrower’s default. If the loan-to-value ratio reaches 80%, the PMI can be dropped. Buying at lower rates allows buyers to make additional principal payments. This means that the PMI can be ruled out sooner rather than later.

For some homebuyers, a 15-year or biweekly fixed-rate loan is more attractive. These debts are paid off much faster than conventional 30-year mortgages.

An ARM, or adjustable-rate mortgage, can be a useful product for some homebuyers. This type of loan is best for buyers when interest rates are low. What borrowers need to consider is how long they intend to stay in the home. Borrowers benefit from staying just a few years, selling the property and moving out before rates go up. If a borrower can pay off the mortgage before rates go up, that’s even better.

ARMs also have fixed rates, but they are more difficult to understand. There is a specific rate that, as interest rates go up and down, stays the same. As rates go up and down, a percentage is added or subtracted, but subject to caps. These limits dictate the maximum and minimum rates you can expect. Make sure you understand the loan terms on an ARM.

Buyers should spend time calculating mortgage options with different down payments and interest rates. This helps them see how the expense of maintaining a mortgage will affect their finances.

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