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Mortgage Loans Enjoy New Varieties, but are They the Best Option?

The performance of the mortgage market is not the same anymore, even with the lower rates. Business has not been that good for the banks, and they have started to make their requirements less strict and offer a wider variety of loans. Among these are interest only mortgages, piggyback loans, adjustable rate mortgages and more attractive terms and conditions.

What does all of this mean for the consumer? For starters, the home buying process may be simplified and you may be able to acquire lower monthly payments.  Yes, there are risks involved and you must have a strong grip on them before you sign up for any type of product.

Ever since the financial crisis loan approval has been given mostly to people with perfect credit scores, and large assets but since the Mortgage Bankers Association has forecasted a decline of 42% in the dollar amount, lenders are now offering their products to people with slightly weak credit scores and also have options for positional buyers who do not have enough money for a down payment.

Right now, the lenders are making certain options extremely attractive, but if you use them, there is a chance that you may have to face financial trouble later on. According to the experts, fixed rate mortgages are still the safest bet.

A fixed rate mortgage is the simplest and easiest to understand among all the mortgage products. Throughout the life of the loan, the rates remain the same and so the monthly payments never change. The average rate for a 30 year mortgage is around 1.22% greater than the adjustable rate mortgages.

Since the rates are consistent, you have to pay a premium. Compared to 2013, this has increased by 1.12 percentage points.  Generally, most of the borrowers have no issues with this since there are limited risks involved with a fixed rate mortgage.

Ever since the year 2010, 90% of all the mortgages acquired are fixed rate products.  Before the financial crisis, people did sign up for other mortgages but during that time a large number of them lost their jobs while their monthly payments rose.  Thus, these people had to face foreclosures and ended up losing their homes.

So if you are looking around for a mortgage, try to opt for a fixed rate product to be on the safe side.


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