Clean Up Real Estate.org

The right loan for you is highly individual. What is right for you may not be right for your friends or neighbors. There are three large areas to consider:

• Plans
  • How long do you plan to own your home?
  • What are your career prospects over the life of the loan? Do you expect your current level of income to go up, down or stay the same?
  • Are you on a fixed income (or will you be in the near future) ?
• Qualifications
  • How much do you have in the bank for a down payment?
  • What is your FICO credit score?
  • Will you need a co-borrower?
  • What type of property are you considering – single family, multi-family, condo?
  • What is the zoning and condition of the property you are considering?
• Risk/Reward Ratio
  • How comfortable are you with risk? How big of a risk are you willing to take?
  • Are property values rising and can you take advantage of lower payments now to achieve greater equity later?
  • How much of a risk can you afford? Is the risk of large payments in the future balance by low initial payments?
  • Do you think the market will go up or down in the next year,? Five years? Ten Years?
• Final Thoughts
  A fixed rate is good if:
  • You plan to stay in your home for a long period
  • You need stability and are uncomfortable with risk.
  • The current interest rates are at historic lows but may rise in the foreseeable future

  It is not necessarily the best choice for people who plan to live in a property for a short time or are seeking a low payment or in a market where interest rates are dropping or expected to drop.
  
  
  An ARM is a good choice if:

  • You plan to live in a property for 3 to 7 years and then move on
  • Interest rates are steady or decreasing
  • You are starting a new career and are assured of increased income in the next few years
  • You want to buy a home with easier qualification standards or lower payments

  They are a poor choice in a volatile market when interest rates are rising. It is important to understand the “worst case” and be able to afford that should you have too.
  FHA loans are a good alternative for home buyers who can easily afford payments, but may have a difficult time accumulating a substantial down payment. They are an excellent choice for borrowers with lower FICO scores. They may be inappropriate in certain areas due to the loan limits imposed by government programs.