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Countrywide Home Loans Shares Tips for Choosing a Mortgage

Whether buying a home or refinancing an existing mortgage, it is important that home buyers and homeowners determine which type of home loan best fits their household’s financial situation. To help simplify the decision-making, Countrywide is sharing 10 tips for choosing a mortgage loan. These helpful insights are just a few of the many valuable ways consumers may arm themselves with the knowledge needed to help achieve and maintain home ownership. “When it comes to choosing a home loan there are some basic principles everyone should consider. Two of the basics are, first, stay within your financial means, and second, never commit to anything without being 100% sure that it is in your best interests,” says John P. McMurray, chief risk officer for Countrywide Financial Corporation (NYSE:CFC), a diversified financial services provider and member of the S&P 500. “There are a number of points to consider when making a decision about taking out a mortgage loan.”

1. Low Payment Now = Higher Payment Later. A lower payment now will almost always mean a higher mortgage payment later. Interest-only loans, “hybrid adjustable rate mortgages” (ARMs) and “option ARMs” are a few examples where the initial payment is typically lower and later payments are higher. It may make sense to have a home loan with a lower initial payment, but it’s important to understand that a “really low” payment now most likely means a high payment later. If you want predictability in your mortgage payments without the risk of your home loan payment increasing, a fixed rate mortgage loan may be the right option.

2. Know Your Prospects. In order to properly evaluate various mortgage loan alternatives, you need to assess your own future prospects. Is your future income likely to be higher or lower? If you opt for a mortgage loan with an adjustable rate, you should have a solid expectation that your future income will increase enough to accommodate the higher payment if the interest rate increases. If you are not sure about your future income, a fixed rate mortgage that provides predictability in your monthly payments may be a better fit.

3. Know Your Time Frame. Time frame is another important consideration. Do you expect to move in the near future or will you stay in this house for a long time? If you plan to move soon, will you keep the house or sell it? Your time frame can, and probably should, influence several decisions you’ll need to make about your home loan. Examples include the type of home loan (e.g. ARM v. Fixed Rate; fully amortizing v. interest only), home loan features (e.g. should you accept a prepayment penalty in exchange for a lower loan price) and rate/points combination (the shorter the period you plan to remain in your home, the fewer points you should pay).

Posted in loan rate, home equity loan comparison, home equity loan bankruptcy, debt finance home loan mortgage, home equity loan rate, loan calculator, home loan, loan, mortgage loan, home equity loan | Comments(0) July 2007