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Refinance Purchase Home Equity

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Fixed ARM Interest Only FHA

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Is It Best To Go Long Term Or Short Term With Mortgage Rates?

By Kevin Landis

Long Term

The most widely used home financing option is the thirty year fixed rate mortgage or long term financing. The thirty year conforming fixed mortgage rate sets an interest that will not change during the term of the loan. The PITI (Principal , interest, taxes and insurance ) on the loan is used to determine the qualification.

Qualifying

The DTI requirement is set by the lender. The DTI is the percentage of the gross monthly income which is used for the mortgage payment and for all other regularly paid bills
(automobile, credit cards, students loans, etc). With the thirty year mortgage rate, the borrower will pay almost twice the actual home cost, or more, in delayed and incurred interest. The actual cost of the loan is provided to customers as part of the Truth In Lending document (TIL)

Short Term

The most common short-term financing option is usually for a fifteen year period. This option has several advantages and some disadvantages. The number one disadvantage involving mortgage rates in short term financing is the mortgage payment will be increased from the long-term . That is simply because the borrower is paying back the loan over a shorter period of time.

Major Difference

Qualifying for a fifteen year mortgage and a thirty year mortgage are the same. And an important aspect in both is the debt to ratio factor (DTI). The mortgage rate on a fifteen year fixed is normally less than for the thirty year fixed ( this is because the lenders calculate less risk over shortened pay back time).If the borrower qualifies they could choose the shorter term loan. The fifteen year mortgage also substantially reduces the total amount paid for the loan. This again is found on the truth in lending form.

Related posts:

1. What Are The Advantages Of Short Term Mortgage Rates?
2. What Is A Term Mortgage?
3. What Are The Advantages Of Long Term Mortgage Rates?
4. If I Am Short On Cash, Do I Have Options To Help With A Down Payment For My Mortgage?
5. Is It Possible To Buy Down An Adjustable Rate Loan?