Looking for mortgage advice for our first house?

Posted on Dec 30, 2011 in Mortgage Advice | 0 comments

Question by JewelryHeart: Looking for mortgage advice for our first house?
What do we need to know? Is there such thing as a 2 or 3 year mortgage where you pay a bare minimum?

Best answer:

Answer by I Buy And Sell Houses
Talk to a good mortgage broker.

There are all sorts of mortgages: Everything from 40-year fixed rate to 10-year fixed rate.

What you’re describing might be similar to ARMS (adjustable rate mortgages). Many of those are structured so that the first 1-5 years are at a lower rate. Then they adjust upward.

Be careful, though. A lot of people now filing for bankruptcy and being foreclosed upon used similar mortgages (very often so-called “Option ARMs), where they paid the bare minimum. There are many “catches” for those mortgages. First, some are negative amortization loans. That is, you’re paying less than the interest alone. So your loan amount actually rises–not falls–month by month. Second, many have a provision that when the borrowed amount exceeds a certain level (such as 125% of the original loan amount), the loan must be refinanced. If you’re “upside down”–owing more than the property is worth–you can’t refinance. And third, many people have found that while they can get by with the minimum payment, they can’t afford the payment once it resets.

Especially in today’s market, go with a conventional fixed-rate loan.

Good luck.

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