Barb Cooper - Austin Real Estate

Mortgage term. Mortgages are generally available at 15-, 20-, or 30-year terms.
The longer the term, the lower the monthly payment if the same amount is borrowed.
However, you pay more interest overall if you borrow for a longer term.

Fixed or adjustable interest rates. A fixed rate allows you to lock in a low
rate for as long as you hold the mortgage and is usually a good choice if interest rates
are low. An adjustable-rate mortgage is designed so that interest rates will rise as
interest rates increase; however they usually offer a lower rate in the first years of the
mortgage. ARMs also usually have a limit as to how much the interest rate can be
increased and how frequently they can be raised. ARMs are a good choice when
interest rates are high or when you expect your income to grow significantly in the
coming years.

Balloon mortgages offer very low interest rates for a short period of time—
often three to seven years. Payments usually cover only the interest, so the principal
owed is not reduced. However, this type of loan may be a good choice if you think
you will sell your home in a few years.

Government-backed loans, sponsored by agencies such as the Federal
Housing Administration (www.fha.gov) or the Department of Veterans Affairs (www.
va.gov), offer special terms, including lower downpayments or reduced interest rates—
to qualified buyers.

Pre-qualification is an informal discussion between borrower and lender. The
lender estimates the amount that you can borrow based solely on what you tell them
about your income and assets. The lender does no verification and is not bound to
make the loan when you're ready to buy.

Pre-approval is an important first-step before you begin looking for a home, and
it helps you determine how much home you can really afford. Getting pre-approved
requires that the lender verify your financial information, and it serves as a
commitment to lend a specified amount based on that information. This gives you
significant buying power with a seller who recognizes you will be approved for a loan.

To a seller, a lender's pre-approval letter is considerably stronger than a pre-
qualification letter. Loan pre-approval is based on documented and verified
information regarding your employment, your income, your liabilities, your assets
and the cash you have available to close on a home purchase. If a seller knows your
financing is secure, your offer is stronger. Pre-Approval also gives you peace of mind
as you shop for a home, knowing that you will qualify for the required mortgage
amount.