Los Angeles Mortgage Basics for First-Time Homebuyers

For first-time homebuyers, learning about mortgages can be an intense process. Selecting the type of mortgage that best fits your Los Angeles home buying needs is a big decision, since it is a monthly payment that you will be making for years and years to come. To learn which mortgage is right for you, speak with a qualified, trustworthy lender. Don’t be afraid to ask questions about three popular types of mortgages available for first-time homebuyers.

1. Fixed Rate Mortgage
Fixed Rate Mortgages are the most common type of mortgage loan; more than half of Los Angeles mortgage owners have one. It is most popular among first-time homebuyers who seek security and simplicity. A Fixed Rate Mortgage (FRM) has a designated interest rate that is fixed for the entire term of the mortgage loan. This means that your monthly payment is the same every month for ‘x’ number of years. Most loan terms are 15- or 30-years; however, you can get a shorter or longer term if necessary.

A Fixed Rate Mortgage is a good option for people who:
- plan to stay in their home for 10 or more years;
- enjoy knowing exactly what their monthly mortgage payment is so that they can budget accordingly;
- received an initial low interest rate and want to lock it down for the entire loan term.

2. Adjustable Rate Mortgage
An Adjustable Rate Mortgage (ARM) is a mortgage loan that has a flexible interest rate which changes over the life of the loan. An ARM generally has a lower initial interest rate than a FRM, meaning that the monthly payment is less. This makes qualifying for an ARM sometimes easier than for a FRM.

An Adjustable Mortgage Rate poses more risk for the borrower, since the interest rate could rise or fall, depending on the market. Be sure to speak to your lender about interest rate caps and payment caps, so that you understand what your maximum monthly payment could be.

Individuals should consider an Adjustable Rate Mortgage if they:
- plan to move from their home in less than 10 years;
- are not concerned with the increased risk associated with an adjustable interest rate.

3. Interest Only Mortgage
With an Interest Only Mortgage, borrowers must only pay the interest on their mortgage loan for a set number of years. For example, if you get an Interest Only Mortgage for 7 years, you will only pay the (adjustable) interest rate for that term. After 7 years, you will be responsible for both interest and principal payments.

An Interest Only Mortgage is a great option for:
- first-time homebuyers who have limited monthly cash flow and can only make small payments;
- investors who wish to invest but not lock a significant amount of money into purchasing property;
- short-term homeowners who can quickly pay off their mortgage loan.

LA Mortgage Articles

How to Select What Type of Los Angeles, CA Mortgage is Best for You
If you need the best kind of Los Angeles, California home mortgage for your lifestyle, there are a few important characteristics of home loans to k.. read more
Date: 2009-09-30 19:42:56

Best Rates on Los Angeles Jumbo Loans
A jumbo loan (a.k.a. non-conforming loan) is a mortgage with a loan amount that exceeds the conforming loan limit set by government-sponsored mortg.. read more
Date: 2009-07-12 15:54:19

Los Angeles Mortgage Basics for First-Time Homebuyers
For first-time homebuyers, learning about mortgages can be an intense process. Selecting the type of mortgage that best fits your .. read more
Date: 2009-07-03 08:44:37