Selecting the Right Mortgage for Your Connecticut Home Purchase

Mortgage Types

The most popular loans Connecticut home buyers are selecting are outlined below. From fixed rate loans to interest only loans, it’s important to select the best loan based on how long you plan to live in your Mansfield, Storrs, Ashford & surrounding CT areas home, along with your current income and future income. For a more detailed review of your home loan options, it is recommended we meet to review your needs and your budget.

Jumbo Loans

Loans which are above the maximum loan amount established by Fannie Mae and Freddie Mac are called 'jumbo' loans. Because investors transact jumbo loans on a much smaller scale, they often carry a slightly higher interest rate than conforming conventional loans.

Fixed Rate Mortgages

With a fixed interest rate mortgage (FRM), your interest rate and your mortgage monthly payments remain fixed for the entire period of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15 years and 10 years. Generally, the shorter the term of a loan, the lower the interest rate you can secure. A fixed rate mortgage has the same interest rate and monthly payment throughout the term of the mortgage. The payment is calculated to payoff the mortgage balance at the end of the term or life of the loan. The most common terms are 15 year and 30 years. If your monthly mortgage includes your property taxes and homeowner’s insurance premium with your principal and interest (PITI), expect your escrow to change (increase or decrease) depending on your annual property taxes and your homeowner’s insurance premiums.

ARM’s (Adjustable Rate Mortgage)

Variable or adjustable rate loan is a loan whose interest rate, and accordingly monthly payments, can and most often will fluctuate over the life of the loan. With this type of mortgage, periodic adjustments are based on changes to a defined index. These changes to the index cause your monthly mortgage payments to increase. The index for your particular Adjustable Rate Mortgage is established at the time of the loan application.

Well known ARM indexes include:

  • Constant Maturity Treasury (CMT)
  • Treasury Bill (T-Bill)
  • 12-Month Treasury Average (MTA or MAT)
  • Certificate of Deposit Index (CODI)
  • 11th District Cost of Funds Index (COFI)
  • Cost of Savings Index (COSI)
  • London Inter Bank Offering Rates (LIBOR)
  • Certificates of Deposit (CD) Indexes
  • Bank Prime Loan (Prime Rate)
  • Fannie Mae's Required Net Yield (RNY)
  • National Average Contract Mortgage Rate

Which Loan is Right for You?

With a variety of different loan programs available to Connecticut home buyers, it is important to choose the type of loan that will best suit your home buying needs. The right type of mortgage chiefly depends on how long you plan on living in your Connecticut home and the amount of monthly payment you can comfortably afford. If you're buying a home for the first time, we're specialists in helping first time home buyers find the best loan programs available and have experts you consult with.

Loan Options to Consider

If you plan to stay in your Connecticut home for no more than 5 to 7 years, it would be reasonable to consider an Adjustable Rate Mortgage, or Balloon Mortgage. ARMs traditionally offer lower interest rates during the early years of the loan than fixed-rate loans. A Balloon Mortgage offers lower interest rates for shorter term financing, usually five or seven years. Because of a lower interest rate it is easy to qualify for these types of mortgages. IMPORTANT NOTE! Don't select an ARM mortgage unless you can afford the maximum possible monthly payment when the loan fully adjusts to highest interest. Generally speaking, you may want to consider 15 or 30 year fixed rate mortgages if you plan to stay in your home for more than seven years.

Know the Cost of Your Loan!

Understand this - all mortgage brokers make a profit off your loan! Otherwise, why would they be in business? It’s important you know what their profit margin is as it could have an impact what your loan will ultimately cost you. Always ask the lending consultant what they charge you in a Yield Spread Premium. Because a lender’s Yield Spread Premium is a negotiable item, it is recommended you negotiate with your lender to save yourself as much of this margin as possible.
 
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