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Which Home Loan Program is Right For You?

There isn't a one size fits all type mortgage. Each individual or family needs to consider many factors before choosing a type of mortgage.

  • Your current financial position
  • Will your finances change in the near future (job change, college)
  • How long do you plan on owning your home
  • How comfortable are you with your monthly payment changing over the life of the loan

For example, a 15-year fixed rate mortgage will save you thousands of dollars in interest payments over the life of the loan, when compared to a 30- year mortgage, but your monthly payments will be higher with a 15-year. If you choose an adjustable rate mortgage you will have a lower monthly payment than a fixed rate mortgage initially, but your payments could possibly get dramatically higher if the interest rates go up over time.


What Are the Different Mortgage Components That Create My Total Payment?

Typically your monthly mortgage payment is made up of 4 different components: principal, interest, taxes and insurance, collectively known as PITI. The principal is the part of the monthly payment that reduces the remaining balance of the home loan. The interest is the fee charged by the lender for borrowing money.

Taxes refer to property taxes that your community and state charge you annually which are generally based on a percentage of the value of your home. The lender usually collects 1/12th of the yearly property tax bill on a monthly basis and places the money in an escrow fund which will pay your tax bill at the end of the year. You do not have to choose to escrow your taxes which will lower your monthly payment but require you to pay a large lump sum at the end of the year.

Lenders require that all buyers have hazard insurance to cover your home and your personal property against losses from theft, fire, natural disasters and other unforeseen problems. The insurance amount can be escrowed and paid much like the taxes, through a monthly payment, or in a lump sum once a year.
