COMPILE THESE DOCUMENTS IN ONE FOLDER:
- One month’s worth of recent pay stubs from each earner
- Tax returns and W-2 forms from the past two years
- Three months’ worth of statements from your bank, 401(k), IRA, mutual funds, and stocks
- Three months’ worth of student loan statements or past mortgage payments
- Letter of employment verification
- Letter from financial gift givers, confirming that it’s a gift
15-YEAR FIXED RATE
- Monthly payment: higher
- Interest rate: lower
- Rate changes: never
- Total interest paid: lower
- Best for: couples who can afford higher monthly payments, want to save in the long run, and plan to stay in their home for a long time
30-YEAR FIXED RATE
- Monthly payment: lower
- Interest rate: higher
- Rate changes: never
- Total interest paid: higher
- Best for: couples who prefer lower monthly payments, may need more time to pay for the house they desire, and plan to stay there for a long time
3/1 ADJUSTABLE RATE
- Monthly payment: lower for three years; then may change each year
- Interest rate: lower
- Rate changes: fixed for three years; then can fluctuate
- Total interest paid: depends on interest rates
- Best for: couples who prefer lower initial monthly payments, are confident they can handle future market fluctuations, and plan to move after a few years
MAKE SURE YOU:
- Review mortgage terminology and rates online (we like MTGProfessor.com)
- Make appointments with at least three banks or brokers.
- Get a GFE (good faith estimate) from each loan officer, with terms and fees spelled out.
- Crunch the numbers and decide which loan is best.
- Sign a mortgage agreement.
- Send thank-you notes to anyone who gave you money or helped you for free.
5/1 INITIAL INTEREST ONLY PAYMENT
- Monthly payment: much lower for five years because only interest payments are required Interest rate: lower
- Rate changes: fixed for five years, then can fluctuate
- Total interest paid: depends on interest rates
- Best for: couples who prefer very low initial monthly payments, are sure they can handle significantly higher payments in five years, and plan to move in a few years
7-YEAR BALLOON
- Monthly payment: lower, then—whammo!—the entire balance of the loan must be repaid or refinanced.
- Interest rate: lower
- Rate change: fixed for seven years
- Total interest paid: depends on rates when balance is due
- Best for: couples with a magic crystal ball that shows a) lottery numbers or b) interest rates in seven years
PAY OPTION ADJUSTABLE RATE
- Monthly payment: four choices each month—very low mini¬mum, low interest-only, or higher principal/interest options
- Interest rate: very low
- Rate changes: monthly
- Total interest paid: depends on interest rates
- Best for: one making minimum payments (like with a credit card), can lead to a mortgage growing over time
See More: Mortgages