Choices That Will Affect Your Loan

There are many choices that your lender will ask you to make when deciding which mortgage to apply for.  Below are four terms you should know to help yourself make an educated decision.

Mortgage term – Mortgages are generally available at 15-, 20-, or 30- year terms.  The longer the term, the lower the monthly payment if the same amount is borrowed.  However, you pay more interest overall if you borrow for a longer term.

Fixed or adjustable interest rates – A fixed rate allows you to lock in a low rate for as long as you hold the mortgage and is usally a good choice if interest rates are low.  An adjustable-rate mortgage is designed so that interest rates will rise as interest rates increase; however, they usually offer a lower rate in the first years of the mortgage.  ARMs also usually have a limit as to how much the interest rate can be increased and how frequently they can be raised.  ARMs are a good choice when interest rates are high, when you expect to sell your home within a few years of purchase, or when you expect your income to grow significantly in the coming years.

Balloon mortgages – These mortgages offer very low interest rates for a short period of time – often three to seven years.  Payments usually cover only the interest, so the principal owed is not reduced.  However, this type of loan may be a good choice if you think you will sell your home in a few years.

Government-backed loans – These loans are sponsored by agencies such as the Federal Housing Administration ( or the Department of Veterans Affairs (, offer special terms, including lower downpayments or reduced interest rates – to qualified buyers.

          Slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment.

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          About Doug Hill

          Doug Hill is an Associate Broker with Coldwell Banker Residential Brokerage, and founded The Hill Group with his wife, Kirsten in 2003. Combined, they have helped over 1,000+ clients buy and sell homes in the Phoenix Metropolitan Area. Doug holds a Bachelor's Degree in Business Management & Economics, and is a Navy veteran. He is an active member of the Southeast Valley Regional Association of Realtors on their Professional Standards Board, and he and his wife have had the #1 team for Coldwell Banker in Arizona for multiple years in a row. He loves to read, travel, and spend time with his family and friends.
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