What Type of Mortgage is Right for You

Questions to Ask Yourself and Your Potential Lender

     If you're wondering which kind of mortgage is best for your anticipated purchase of Tampa real estate, the answer is that there is no single best answer for everyone.  Deciding which type of mortgage best meets your needs can be difficult.  There are many types of loans, different terms and different lengths.  Nonetheless, your choice is extremely important and is worth some time and effort to research.  A little research before choosing your mortgage can save you thousands of dollars over the length of time you own your home.

     There are several components of a mortgage loan that need to be understood and analyzed.  You must weigh each component. Your answers to the following questions will help you determine the type of mortgage and the mortgage lender that best fits your circumstances and plans.

1) How long do you plan to stay in the home you're planning to buy ?

• Less than 5 years
• 5 - 10 years
• The full 15 or 30 years of a conventional mortgage

     The length of time you plan to remain in the home will play a part in determining which type of loan to apply for.  If you only plan to be in the home for 5 years or less, you may want to reconsider buying a Tampa Florida home at all at this point.  But, if your personal situation requires that you buy a home, then you may want to consider an adjustable rate mortgage or ARM.  On the other hand, if you intend on staying longer than 5 years, a fixed rate mortgage may be a better choice depending on your "risk tolerance."

2) How much risk are you willing to accept ?

     If you're the type person who needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will ease your anxiety.  However, a fixed rate loan will also most likely cost you a higher interest rate.  If you're willing to take some risk of fluctuation in your interest rate, you may be able to obtain a lower interest rate (at least initially) with an adjustable mortgage.

3) What is the outlook for your income over time?

     Do you anticipate a gradual or dramatic increase in your income over the next few years?   If you expect to see a substantial increase in your earning power over the next few years, a graduated payment mortgage may be a good option.   If, on the other hand, you expect your income to remain relatively stable, perhaps you'll be more comfortable with a fixed rate mortgage so you can predict more accurately what your Tampa hone costs will be in future years.

4) How much cash do you have for upfront costs?

     If you have the resources, you may want to make a larger down payment that will reduce your monthly payment.  For example, if you can afford a 20% down payment, most lenders won't insist on Mortgage Insurance and that will reduce your monthly cost or allow you to buy more home for the same monthly payment.  Keep two things in mind, though.  First, you'll need cash beyond your down payment for closing costs and fees.  Be sure to ask any lender you contact to estimate the total cost you'll pay at closing before making a decision on how big a down payment to make.  Secondly, remember that you're going to have to spend money moving into and furnishing your new Tampa area home, so keep some money aside for those costs.

     In addition to choosing a type of loan, you must also consider which lender to use.  Here again, several factors will influence your decision.

1) The Annual Percentage Rate or (APR) - The Real Total Cost of the Loan

     This is the best way to make an "apples-to-apples" comparison among lenders' mortgage rate quotes.  The APR reflects the cost of credit on a yearly rate including any and all points and fees imposed by the lender over and above the advertised simple interest rate.

     Beware of "hidden fees."  As you move from one potential Tampa area mortgage source to another, ask the same questions.  If one firm mentions a certain fee, check back with the others you've spoken with.  Do they not charge that fee or did they just not mention it.  Realize also that it is possible a lender did mention a certain fee but you might not haqve made a note of it. Another eason to get everything in writing.

2) The Interest Rate Commitment Period

     Be sure to ask prospective Tampa Florida lenders how long they'll guarantee the interest rate quoted to you.  As with any part of a Tampa real estate transaction, if it isn’t in writing it doesn’t exist.

4) Final Loan Approval and Funding Outlook

     The expected time it will take your mortgage provider to give final approval to your mortgage and provide funding also needs to be part of your comparison of potential mortgage providers.  When you sign a purchase offer, you'll specify a time period for you to get mortgage approval.  Tell prospective mortgage providers you need an honest estimate of the amount of time it will take for final approval and funding.  You don’t want to lose the "Tampa home of your dreams" because your lender took weeks longer than expected for final approval and funding.

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