Mortgage Life InsuranceMorgage Life Insurance provided by most lenders are there to protect the lender not you. You must learn about loans, mortgages and how this whole process works before you engage in it. Here is a quick learn about loans, mortgage brokers and adjustable rate mortgage as well as fixed rate mortgage and how if you are not equipped with the right information, you can become impacted by our current economic crisis. Mortgage brokers are licensed authorities whose job is to help you find loans that you would qualify for from a lending institution. The way you would qualify would consist of your credit history, your income history and your ability to pay. Some of these loans would be either fixed for seven to thirty years and then adjust thereafter or they will have an adjustable rate from the beginning. An example would be: In order to qualify for the mortgage the maximum monthly payment you can afford is $480 per month. Here are your options: Terms Loan amount Rate Payment Option 1: 30 Year Fixed Mortgage $100,000 6.00% $599.55 Option 2: 30/10 Year Fixed Mortgage I/O $100,000 6.00% $500.00 Option 3: 3YR Adj. Arm. Mtg. I/O $100,000 5.75% $479.17 In the 3 year adjustable mortgage interest only your starting fixed rate is 5.75% and your mortgage payment for the first three years is $479.17. But after the first three years your rate and payment adjust every year. Your first adjustment is on month thirty seven. Now your payment is $737.43 for twelve months, and it continues to go up for the most part every year after that. What your mortgage broker tells you is that Option 3 is your best option because all you can afford is $479.17 per month. What he neglects to educate you about is that this loan program will force you to either refinance in three years, costing you closing cost all over again and risking that the rates will be low. Or staying within the mortgage program and deal with the increasing mortgage payments. Taking into consideration that your mortgage payment will go up the first time by over fifty percent. That is a very big adjustment forcing you to make some life choices of either getting another job or selling the house and if the market is as it is now, you might not be able to sell this loan or get the mortgage with a favorable rate. Currently, the rates are the lowest they are going to be in a very long time. The best choice for you would be not to buy this $100,000 house. To buy an $80,000 house. In the above scenario with the $100,000 house you get what you want, the broker gets what they want but in three years you are left with a very bad choice to make. It is best to make a good choice now. But a house you can afford now with a fixed rate of 6% for 30 years. If for whatever reason your income does not increase in one to three years, it should but in case it does not, then you know that you have control and can afford your home without incurring any additional expenses. By the way, the mortgage payment fixed for an $80,000 home is $479.64.
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