2009 Real Estate Guide
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real estate
Today's mortgages: back to the future

Sizing up the best choices for your mortgage or refi? Here's how the major contenders stack up:

Conventional, 30-year, fixed rate

Current rate: 5.23 percent *

Advantages: Low rates. Predictable payment schedule.

Disadvantages: Can be difficult to get because lenders are tightening restrictions. Lenders are also requiring larger down payments.

Who's using: Borrowers with stable jobs, excellent credit and the money for a down payment.

Smart tip: Try a variety of lenders (large and small banks, credit unions) to score your best chances of approval at the best rate. Check Bankrate's rate tables to find the most recent rates.

Conventional, 15-year, fixed rate

Current rate: 4.73 percent *

Advantages: Slightly lower rate. Ability to build equity faster and have the house paid off more quickly.

Disadvantages: Higher monthly payments and some think the slightly lower rate isn't enough to make the deal palatable.

Who's using: People with ready cash who want homes paid off more quickly.

Smart tip: You can achieve similar results without being locked into the higher monthly payments by using a 30-year mortgage and putting extra money toward the principal every month. Also, consider job stability when you make the 15- vs. 30-year decision. Check Bankrate's rate tables to find the most recent rates.

Adjustable rate

Current rate: 5.05 percent on a 5/1 ARM *

Advantages: Slightly lower rates than fixed mortgages.

Disadvantages: Payments can increase. Massive financial difficulties can be triggered if borrowers can't afford the new payments, sell or refinance.

Who's using: Borrowers who are confident with their jobs, who are stable and who can shoulder the larger payments if the rates adjust. Buyers who don't plan to stay long in their homes.

Smart tip: No matter how long you plan to stay in your home, be sure you can afford the payments after the rate resets. Check Bankrate's rate tables to find the most recent rates.

FHA

Current rate: Same as similar conventional loans with an extra 0.5 percent annual mortgage assurance premium rolled into the loan.

Advantages: Lower down payments, typically 3.5 percent. Underwriting is more forgiving. Good for first-time and low-income buyers, and those with less than perfect credit. Mortgage limits are high enough to accommodate most people. Offers 15- and 30-year options. Sellers can contribute up to 6 percent of the loan amount for closing costs.

Disadvantages: Loan limits many not accommodate some higher-end buyers. Allow 45 to 60 days to secure loan. May not be available for someone with disastrous credit.

Who's using: Everyone from first-time buyers to repeat buyers to existing homeowners who want to refinance.

Smart tip: Shop around. Different institutions will set different standards, and that affects not just approval but also the deal you get.

VA

Current rate: Same as similar conventional loans.

Advantages: No or low down payment. No minimum credit score, though that can vary with the individual lender. Loan limits are high enough to accommodate most people (and higher than with FHA loans).

Disadvantages: None. If you are eligible and your mortgage is below the allowable limit, it's a great option.

Who's using: Veterans, former veterans and widows and widowers of those killed in the service.

Smart tip: Not all VA-approved lenders use the same underwriting rules, so shop around for the best deal.

Source: Rates from Bankrate.com as of April 30, 2009.

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