Buying House: Interest Rates & Mortgages

The Long term interest rate has gone down again after creeping up a little
for some time. The recent rise in mortgage rates was, however, not
significant enough to dampen the demand for housing. One can still get a
30-year fixed mortgage for about 5.8% (Fraddie Mae report last week),
near its multiyear lows and at levels consistent with strong demands
observed in recent years.

Also, with a plethora of creative financing available for buyers of all types,
home buyers and investors alike are realizing that the standard 30-year
fixed mortgage is not necessarily the perfect solution for their financial
needs. Many have opted for some excellent alternative programs. Here
are two of those that offer some of the best interest rates available. Both
these programs are good for first-time home buyers or investors:

Option ARM: It has a start rate as low as 1%. It is an adjustable rate
mortgage based on either of two indexes. It is a loan program that
provides both stability and flexibility. The stability comes from the fact
that the indexes are based on a 12-month rolling average or weighted
average. The flexibility gives you four payment options every month:
(i) minimum, (ii) interest only, (iii) principal and interest based on a 30
year schedule, (iv) principal and interest based on a 15-year schedule.

Interest-Only Programs: These ARMs feature interest-only
payments for a set period, the first 3, 5 or 7 and even upto 10 years. You
can qualify for more of a loan and more of a house with these arms.