There is a lot of confusion in the mortgage market these days. With all of the choices available, it is difficult for a borrower to choose the best mortgage.
Before you begin to negotiate a mortgage, understand all of the various options available.
The first option you may face is between an FRM and an ARM. An FRM is a fixed rate mortgage and an ARM is an adjustable rate mortgage.
Even if you have chosen an FRM, you will have a mixture of choices in this kind of loan.
ARMS are even more complicated in the various types kinds that are offered. There is practically no end to the different types of ARM mortgages that are currently being offered by lenders.
You may also be offered the option of an interest rate only mortgage, although these are becoming more rare.
And then you have to decide upon the rate and point combination you choose, since you can reduce your overall rate by paying up front points. Calculating the value of the points over the length of the loan will help to make this choice.
The next decision is how much of a down payment you want to put down. There are those who have a lot of money to put down and have to make the decision about whether it is better to use a lot of it for a down payment, or only some, and invest the rest.
Now you will be asked if you choose a loan with a prepayment clause. You should definitely decide upon this if you feel you want to pay off the loan before the end of its term.
Next, think about a lock in rate. The problem with a lock in rate is that interest rates can go lower. If you lock in a rate and then rates come down, you may be stuck with an increased rate. Some mortgage offers do have a lock in rate that allows you to opt out if rates decrease, but you will have to pay for this privilege. If you feel strongly that rates are going up, or you just don\'t want to be bothered predicting rates, take a lock in option.
All of these loan features will make the choice of your mortgage more complicated, but it is critical to understand what features you are being offered. This will make the negotiations with your lender a lot easier and more profitable in the long run.
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