Multiple Mortgages

The mortgage process can be overwhelming; especially the first time you face it. Doug Duncan with the Mortgage Bankers Association says, "There's almost as many options as you can imagine."

Option Rundown

Low or no down payment
Duncan stresses the choices out there when he says, "The mortgage market now has an array of products, not only in terms of type of payment, but in how much you have to pay down to get into it." Low and no down payment options are everywhere, if you have the right credit score.

30-year loan
Experts say the most popular mortgage choice is the 30-year loan with a fixed interest rate. People like the idea that their payment is set -- the same today, tomorrow and for good. However, Duncan says that doesn't necessarily make it the best choice. For example, if you know you won't be in the home for long, you may end up paying more for interest than principal, losing out on equity.

ARMS
Duncan says the average life of a mortgage in this country is seven to nine years. You can often lock in a lower interest rate with an ARM, or adjustable rate mortgage, than you would get with a fixed-rate loan. That translates to savings on your monthly mortgage payment.

Interest-Only Loans
These are one of the newest innovations to hit the market. Duncan says these are ideal for people looking to get into a lot of home for not a lot of money. Because they're paying only interest, they still get the tax deduction. However, the interest only period does eventually end and you'll have to start paying down the principle.

Bright Idea!

No matter which loan you like, be sure you shop around for rates and fees. They can vary dramatically among banks and brokers.

When shopping around, be sure to ask about the "lock." It allows you to lock into a low interest rate, so you don't end up with something much higher than what's now available.

Locking In

An interest rate lock is a contract between a lender and a borrower where the lender promises a specified interest rate.

The terms vary by lender to lender and state to state. A lock may not cost you a penny. Some lenders will lock you in as a way to guarantee your business. Other lenders will charge a couple hundred dollars to lock you into a low rate. The length of the lock is typically 30 to 60 days, but some lenders offer longer locks. You may even be able to extend your lock for a small fee.

Ask for a 'Floatdown Provision'. The floatdown will allow you to lock into a lower rate if one becomes available. If the interest rate goes up, the lock will protect you from having to pay the higher rate.

Bright Idea!

Get your lock in writing. If you don't have written documentation, you can't be certain you'll get the rate you were promised. Also, be sure you shop around. Experts recommend talking with three lenders to compare rates. The first rate you are quoted is not always the lowest rate you'll find.

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