When you want to create a better future for yourself by being a homeowner, you have to know which form of mortgage financing is best for you because there are two types.
The first type is the adjustable rate mortgage and the second type is the fixed rate mortgage.
The adjustable rate mortgage is a mortgage that may start out with a low payment at first, but fluctuations in the interest rate that is determined by the federal reserve has an impact on what your payment is going to be in the future.
The latest housing crisis had individuals with adjustable rate mortgages losing their homes because their payments had gotten to a point they couldn't afford.
Basically, an adjustable rate mortgage is best for those who will be living in their home for a short period of time.
In the beginning it yields the lowest payment.
Fixed rate mortgage Since the beginning of the last housing crisis what individuals all over the United States learned was that the fixed rate mortgage is the best for those living in their homes for the long term.
The payment stays the same and so does the interest rate.
It does not matter if the interest rate skyrockets in the future, the rate is locked in.
Getting the best mortgage financing The best mortgage financing can be secured through certain criteria.
The first is your credit score.
It is required that you meet a set of minimum requirements.
There are different types of loans and each loan has a different requirement.
The second is the down payment.
Again, different loans have different requirements.
Your credit score may determine what you need to put down as well.
In some cases you may be able to finance your down payment.
The third requirement is that you have a debt level that is not too high.
Different loan types will have different debt-to-income ratios.
The debt-to-income ratio is how much you make versus how much you are paying out.
Unfortunately, many people pay out more money than they make.
These are the people that do not get financing despite how good their credit is or how much of a down payment they have (unless the down payment pulls the mortgage amount down far enough to keep the debt-to-income ratio within the required limits).
Take note that the higher your down payment, the lower your monthly mortgage payment.
Your down payment takes money off of the entire loan amount, hence lowering the amount that you owe.
When the loan term is divided into how much you owe, the payment goes down.