2nd Step to Take When Choosing a Home Loan

Pick out the TERMS of the loan you want BEFORE you compare rates.

There are many different terms of home loans. The first is the length of the loan – 30 Year, 40 Year, even 50 Year – and sometimes Interest Only! An Interest Only loan is a loan that you never have to pay off – you only have to make the monthly interest payments. The second is the length of the rate – you can have a guaranteed rate for 30 years, or any period from 1 to 7 years. Loans with a guaranteed rate for 1-7 years are called Adjustable Rate Mortgages (ARMs) because the rate will adjust up or down with the market after the guaranteed rate period is over. The safest loan is a 30-year fixed rate mortgage. You should also be aware of a pre-payment penalty – this is a pretty substantial penalty should you decide to refinance the loan or sell the house within a certain period of time. One to two year pre-payment penalties are common, and sometimes the loan will have a longer pre-payment penalty.

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