mortgage

Choosing the right home loan

You've probably heard the news -- today's low rates mean there has never been a better time to shop for a home loan. However, it's important to know what you're looking for to get the right deal.

Finding the right home loan depends on several factors. You need to decide what you can afford, how long you plan to stay in the home, your financial goals and tolerance for risk.

Determine what kind of a home loan you can afford by using a mortgage calculator. Then, decide what type of home loan to apply for based on how long you want to stay in the home.

ARM or fixed-rate?

For example, if you only intend to stay in your home for the next three to five years, you may want to apply for an adjustable-rate mortgage, or ARM. Rates are often lower on ARMs than on fixed-rate mortgages.

You also may want to opt for an ARM if you plan on staying in your home for the long haul but feel confident interest rates will either stay the same or drop by the time you have to renew the loan.

However, if you feel interest rates are likely to rise or you don't want to take any risk, a fixed-rate home loan is most likely the best choice. If you're looking to secure more equity, a fixed-rate mortgage also may be your best bet.

Buyers should also look beyond mortgage rates when choosing a company or bank for a home loan. For example, compare closing costs, which is easier to do now thanks to the good-faith estimate, or GFE, documentation lenders are required to provide.

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