Hi all!

I hope this finds you doing well!

The latest question that has come up is "Why are some loan programs better than others, and how are they better or worse?" Well, it all depends on your situation.

While there are Rural Housing Loans (the home has to be in a designated rural housing area), VA Loans (must be currently active duty, or a veteran with certain stipulations), FHA (government backed), there are also Fixed Rate, Adjustable Rate Mortgage (ARM), and Interest Only mortgages (just to name a few).

Fixed Rate Mortgages: when you get the loan, you get a fixed rate for 15, 20, 30 years. You pay that interest rate for the life of the loan, it does not go up or down. Your principal and interest payment will stay the same. That does not mean your payment won't change, though--your taxes and insurance may change, and if they do, it will affect your monthly payment. That's the advantage of having a fixed rate mortgage--knowing your payment won't change by too much. You can budget that amount for the next 15, 20 or 30 years (whatever the life of your loan), and know that it won't change. When you get the loan, your interest rate is based on "today's" going rate, and can be locked in for 30 or so days (how many days will depend on your lender--some will be longer, some shorter).

Adjustable Rate Mortgages (ARM): There are a many variations of these. They are fixed for a period of time, anywhere from one month to five years, and then they will adjust according to the index and the margin. The disadvantage of these is that your payment COULD go up, but it could also go down. When the interest rate adjusts, it adjusts according to what the rates are doing at the time of adjustment. There is a CAP rate you also need to be aware of. A CAP rate shows the maximum amount your rate can go up in an adjustment period and/or for the life of the loan.

Interest Only Loan: These are loans where you pay only the interest, and none of the principal on the loan. This means that your principal won't go down--you won't buy down any equity by making the payments. These usually have a balloon payment at a certain point, where you are expected to either pay off the mortgage in full, or refinance.

So what's the best loan to get? That depends on your situation. If you know you're going to be in your home for less than five years due to the nature of your job, an ARM isn't necessarily a bad option. With an interest-only loan, you may have gotten a GREAT deal, and already have a lot of equity in it, and only plan to be in it a short time (whether you occupy it, rent it or sell it or any combination of the three). Fixed rate, you're payment will pretty much stay the same except for tax and insurance adjustments that would affect your monthly payment.

The BEST thing to do is to talk to your lender about your current circumstances and what your future plans are regarding your current job, and with this home (live in it, rent it, buy/fix/sell it). AND ask a LOT of questions. Ask them to explain the different programs to you (there are SO many different ones, which is why it important to be honest with your lender). The ultimate decision is yours. It can all seem confusing, so if you need to, take the information home and read through it until you do understand it better. If you have additional questions, you can ask your Realtor, or your lender. There's a lot of paperwork you have to sign when you get a loan, so it's best to understand it before you get to the closing table.