Types of Mortgages

Tempe, Arizona is the fifth largest city in Arizona and growing fast because of the central location, great climate, low housing prices and booming economy. Tempe is continuing to grow and if you are planning to relocate to Tempe, Arizona you should start thinking about all the various mortgages loan types and qualifying for a mortgage loan. You will find information to help you obtain a home loan in the state of Arizona. Because of the great housing market, Tempe has many mortgage brokers and banks to choose from.

You will find that there are many types of home mortgage loans to choose from with lots of diverse offerings and mortgage loan application options. In the past almost everyone selected a 30-yr fixed rate home mortgage. Now, there are so many different options that are targeted at a certain group of individuals in different financial situations.

ARM (Adjustable Rate Mortgage)

If you know you are going to be living in your Arizona home for a few years an Adjustable Rate Mortgage is the best. An adjustable rate mortgage is also called an ARM. ARMS's have a fixed interest rate and fixed payment for a number of years. The mortgage payment is usually based on the amount to payoff the entire mortgage balance at the end of the term, which is usually 30-yrs. The most common types of ARMS are 1 yr, 3/1 yr, 5/1 yr and 7/1 yr ARM, After the initial period is over, the rate and term of the mortgage will be adjusted annually to current market mortgage rate if you do not refinance the loan. Most ARM loans have caps on how much the interest rate may increase after the loan expires. ARMS are very popular because the rates are usually about 2-3% lower that a fixed rate which means lower payments. The less number of years usually means the lower interest rate. A 1 yr ARM will have a lower interest rate than a 5/1 yr adjustable rate loan in Tempe, Arizona.

FIXED RATE Mortgage

If you know that you are going to be in your Arizona loan for a number of years then a fixed rate mortgage is good. A fixed rate mortgage is the most common and usually are 15 yr loans or 30 yr mortgage loan. A fixed rate mortgage loan is good if you know you will be living in your home for extended time and you don't have to worry about your monthly mortgage payment ever increasing. The payment will be the same for the entire life of the loan. The first payment will be the same as the last payment. If the rates go up you will have an advantage because your rate is fixed at a lower rate which means your payment would not go up. But if the rate drops tremendously your rate will not go down unless you refinance your mortgage. Rates went up to 18% at one time and as low as 4% at another time so it is hard to tell what will happen.

A 15-year mortgage will have a little lower interest rate and a higher payment than a 30-year fixed mortgage rate. The advantages to this type of mortgage is that you will get more equity by paying down the principal balance. You also will have the loan paid off faster and will not have paid as much total interest when the loan ends. It could save you $100,000 or more in interest.

A 30-year mortgage loan will usually have a higher interest rate than a 15-year and a lower payment. This is a good type of loan to get if you are short on money or cannot qualify for the higher mortgage payment. If you start to make more money and want to pay off the mortgage balance faster you can always set up bi-weekly payments with your lender. You also can just pay more money every month and apply it to the principle balance. The lenders usually do not have a penalty for this.