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Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require the borrower to provide less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.

Who is Eligible for a First Time Buyer Loan? First time home buyer programs are designed to help borrowers who may not have enough money to pay the full cost of the down payment or the closing costs on a mortgage. These programs make obtaining a mortgage more cost effective. There are even programs specifically for residents of each state. First time home buyer programs are available to those who have not owned a home for the past three years.

A large amount of first time home buyer programs are FHA. Be prepared to spend a few hours in class so you can get a certificate stating your eligible.

Some First Time Buyers Programs require as little as 3% down.

Many other first time home buyer programs require that you either take a course or do a self study program with a workbook to learn about the responsibilities and financial obligations involved with owning a home. Even if these programs are not required by your lender or broker if is a good idea to do them anyway. Talk to your broker they can get you the information about when the classes are or provide you with a work book. Many of these courses and workbooks are provided through a PMI Company

A first time home buyer is considered somebody who has not owned a home in the last three years.

First time home buyers may also have other advantages such as discounted transfer tax. Check your local and state regulations to see what benefits you may qualify for, make sure your mortgage professional is aware that you are a first time home buyer. Some of the advantages define a first time home buyer as a borrower who has not owned a home in the past three years, others require that the borrower has never had any interest in any property.

Some local First Time Home Buyer programs offer down payment assistance. To be eligible, applicants’ household incomes must not exceed an amount set by the program administrators. These income limits are usually calculated by multiplying the Area Median Income with a percentage (e. g. 110% of the AMI). The program administrator may place a lien on the home to prevent the homeowner selling the property for profit shortly after settlement. Such liens usually dissipate after 5 to 10 years.

You may find that there are some mortgage loan programs, usually ones that the lender has a higher perception of risk, that are not available to first time home buyers.

Generally the programs will have a step by step guide to get you thru the process of home ownership.

Your home provides many tax benefits. Here are some of the benefits of being a home owner.

1. All yearly interest is tax deductible. Including any points paid for financing.
2. You can deduct the total amount of your yearly property tax bill.
3. In addition to paid interests and real estate tax being tax deductible, most of the settlement costs are also deductible. For purchase transactions, settlement charges are deductible in the year the transactions occur. For refinances, closing costs are deductible throughout the life of the loans. As always, consult a certified tax accountant before taking any such deductions.
4. Home values have sustained growth through the years. Historically there has been no better financial investment than home ownership. It is the best hedge against inflation because real estate is the world’s only commodity in absolutely limited supply. Population growth steadily increases demand, thus the increasing value of real estate over time has been constant.
5. You can also use your homes equity to your advantage by consolidating debt, purchasing big ticket items with a 2nd mortgage or HELOC at comparable interest rates, lower payments and you are able to deduct the interest from these mortgages as long as the loans do not exceed 100% of your homes value.
6. Please keep in mind though, because of the complexity of tax laws, you must always consult your individual tax advisor for the precise tax advantages of your home and it’s mortgage. Mortgage professionals can give you general guidelines but things can vary from homeowner to homeowner.
7. The tax advantages of renting - NONE! Don’t pay someone else’s mortgage payment for them every month. Contact your trusted local mortgage consultant and get pre-qualified for a home loan today.
8. In addition to tax advantages you can greatly benefit from your home’s appreciation. A general rule of thumb is about 4 - 5% per year on average. If you bought a home that is worth $100,000 then at the end of one year’s time it could be worth:1st year = $105,0002nd year = $110,2503rd year = $115,762and so on…

A form of mortgage in which the lender makes periodic payments to the borrower, using the borrowers equity in the home as security. For older owners who have a lot of equity in their home, this can be used as income. The loan does not need to be repaid until the borrower sells the property or moves into a retirement community.

When you sell your home or no longer use it for your primary residence, you or your estate must repay the lender for the cash received from the reverse mortgage, plus interest and service fees. Any remaining equity belongs to you or your heirs. It’s important to remember that you can never owe more than the home’s appraised value when it is sold. None of your other assets will be affected by your reverse mortgage loan.

Reverse mortgages are a great way for an elderly person or couple to supplement income, especially if they are only getting social security as retirement income.

Any principal and interest accrued over the life of the loan is due and payable in one lump sum when the last borrower in the home is no longer the primary resident. In most cases, the amount that is due can be paid either by the selling of the home (where the difference of the selling price and remaining debt is left with the heirs), or refinancing the reverse debt with a traditional mortgage.

This is a great income supplement for those who need it.

A reverse mortgage is an agreement allowing a homeowner to borrow against home equity and receive tax-free payments until the total principal and interest reaches the credit limit of equity.

In reference to the HECM (most popular reverse mortgage), the fees associated with this loan are as follows: 1) Maximum of 2% origination fee based on the lesser of FHA’s lending limit or the home’s appraised value; 2) Closing costs such as title, escrow, appraisal, etc; 3) 2% charged by HUD on the lesser of lending limit or home value for initial mortgage insurance premium; 4) Monthly servicing fee of between $25 and $30 that is set aside initially and added to the loan balance as the loan progresses.

Loan to Value calculations, Credit requirements (FICO scores), and Debt to Income calculations are not used in determining how much a borrower can access in equity. For the HECM program, the amount that can be borrowed is based on the lesser of home value or lending limit, age of youngest borrower in the home, and an interest rate.

A Reverse Mortgage is a financial tool which provides seniors 62 years of age and older with funds from the equity in their homes. Generally speaking, no payments are made on a reverse mortgage until the borrower moves or the property is sold. The final repayment obligation is designed to not exceed the proceeds from the sale of the home.

There are currently 3 reverse mortgage programs available. The most popular reverse mortgage program is the FHA insured Home Equity Conversion Mortgage (HECM). The second program is the Fannie Mae Home Keeper, and the third is a jumbo reverse mortgage (cash account) offered by Financial Freedom. With the exception of the Home Keeper, the HECM and the Cash Account can be structured in different ways (i.e. interest rate adjustment for HECM, point variation on the Cash Account).

Possible income source for those who are on social security or limited fixed income.

A Reverse Mortgage borrower cannot be forced out of his/her home. Nor will he ever owe more than the value of his house. Reverse Mortgages are “non-recourse” loans, meaning in the rare case of drastic declines in home prices, the homeowner can never be held liable beyond the value of the subject home.

A reverse mortgage allows homeowners that are 62 and older to unlock a portion of the equity in their home without having to make a monthly repayment. The amount that they can unlock will be determined by a combination of three things: 1)Youngest borrower’s age 2) Lesser of their home’s value or a lending limit (HECM and FNMA) 3) An interest rate.

There are three basic types of reverse mortgage are: single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations; federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD); and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.

Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.

You can get your money in a lump sum or monthly payments.

There are no credit requirements. Only that you need to 62 years of age or older and have sufficient equity.

You maintain complete ownership of your home.

If you are a senior at least 62 years old who is “house rich, but cash poor”, a reverse mortgage may be a viable option to help get you the cash you need. Whether paid to you in lump sum or in installments, reverse mortgages require no payments from your side and are generally not taxable and generally don’t impact social security or Medicare benefits.

Because this loan must be the first lien on the home, any existing mortgage balance must be paid with the proceeds of the reverse mortgage. For instance, if the amount that can be borrowed from the reverse is $100,000 and the existing mortgage balance on the home is $50,000, the $50,000 will be paid with the amount available from the reverse ($100,000) and the remaining balance ($50,000) will be available to the homeowner. The homeowner can elect to convert the $50,000 into a monthly payment, place it in a line of credit, take any or all of the amount at closing, or any combination of the three.

The amount of cash that a borrower can receive is based on a formula of factors that include age of the youngest borrower, the interest rate, value of the home and the county where the home is located.

You will usually have several choices of Adjustable Rate Mortgages (ARMs) offered: 3/1, 5/1, 7/1 and 10/1. The numbers used to describe the ARMs refer to the period for which the initial rate holds, and the rate adjustment period after the initial rate period ends. On a 3/1, for example, the initial percent rate holds for 3 years, then the rate adjusts annually. All these ARMs have annual rate adjustments after the end of the initial rate period.

Another critical factor to consider when choosing an ARM loan is, what are the annual caps and the lifetime caps of the ARM loan. In other words, is there a maximum rate that my loan can go up to or can it just adjust as high as possible each adjustment period and over the life of the loan. Most ARM’s have an annual cap of 1-2%. This means that your rate cannot increase or decrease by more than 1 or 2 percent at any given adjustment period. Most ARM’s have a lifetime cap of 6%. This means your rate cannot increase or decrease by more than 6% over the life of the loan. Example: 3/1 ARM, start rate is 4.5% fixed for 3 years, there is an annual cap of 1% and a lifetime cap of 6% Over the life of the loan your rate can never be higher than 10.5%, and each year your rate could never adjust more than a 1% increment. So at the time of your first adjustment your rate could not be higher than 5.5% or lower than 3.5%.

Typically the interest rate on an ARM is lower than the interest rate on a fixed rate mortgage. ARMs are a smart choice over a fixed rate if you do not plan on keeping the property for a long period of time.

Watch out! Sometimes the relationship between ARM loans and Fixed rate Mortgages(FRM’s) can become inverted! This means a 5 year ARM (or a 3,7, or 10) could actually have a higher rate than a 30 Yr. Fixed.

When choosing what ARM product is best for you make sure that you do not have a pre-payment penalty that is longer than the fixed period of your loan. You do not want to be in a 2 year ARM and have a pre-payment penalty that lasts for 3 years.

Real estate investors and buyers who value managing and maximizing their free cash flow may benefit from the pay option ARM adjustable rate mortgage program, which allows homeowners the option of deciding how much to pay on their mortgage each month.

When choosing among different Adjustable Rate Mortgages, it is as important to pay attention to the underlying indices as the margins. Some indices are more volatile than others and adjust more frequently.

If you know that you are only going to be in the home for a short period of time you should try to get a loan with a fixed term that is similar to that time period. For example, if you are planning on staying in the home 3 years, get a 3 year ARM. Most people don’t stay in a home for 30 years, why get a loan that is fixed for that length of time?

One key thing when thinking of choosing an ARM loan would be to do some research on the various popular indices such as the LIBOR, MTA, COFI and COSI. Make sure you pick an index that is consistent with you plan for the mortgage. Be careful of lower margins, they are usually tied to a more volatile index. A good mortgage broker can help advise you in this regard.

You should discuss all the types of ARM mortgages being offered. Discuss the indexes and the margins. Make sure your comfortable with the ARM you choose.

If you do have an ARM with a pre pay penalty ask if it is a hard or soft pre pay. A soft pre pay will allow you to sell the house with no penalty. A hard pre pay requires you to pay the penalty if you sell or refinance the mortgage before the pre pay expires. Pre pay penalties will vary in the amount required from 60 days interest to 6 months interest.

Every ARM loan is tied to a financial market index, such as CDs, T-bills, COFI or LIBOR rates. Your rate is determined by adding an additional percentage known as a margin) to that index’s rate. When the index rises or falls, your interest rate rises or falls with it. Make sure you know your ceiling interest rate or lifetime cap. This is a guarantee that your interest rate will never exceed a designated percentage. For instance, if your introductory interest rate was 5% and you have a lifetime rate cap of 6%(Meaning that your interest rate can never increase more than 6% during the life of the loan) then your lifetime cap would be 11%. Your interest rate could never exceed 11%, ever. What Are the Benefits of an ARM?A lower initial interest rate (usually 2% to 3% lower than fixed-rate mortgages)makes qualifying easier and the payments more manageable at first. You may qualify for a larger loan than you would with a fixed-rate mortgage. If you’re only planning to stay in the home for a short time, the interest rate is likely to stay lower than that of a fixed-rate mortgage. If you expect regular pay increases that would cover the increase in your interest rate, or you believe interest rates will fall, an ARM might be the wiser choice.

There are also two critical elements to consider when evaluating an ARM: the index and the margin. The interest rate you will pay at the end of the fixed period will be determined by the index at that time, which may adjust periodically, and the margin, which will remain fixed for as long as you remain in that loan.

Aggressive monthly ARM’s may be available for even lower monthly payment. These can make sense for short term ownership or investment properties.

Editors Note: Due to the mortgage and credit crunch, Low Down Payment Mortgage Programs may no longer be available. If you’re in need of a Denver Colorado Mortgage contact us to discuss your mortgage options.

Here’s no question about it: Buying a first home is a big financial commitment. In most cases, a home is the largest single purchase an individual or family will make in a lifetime. However, because of the tax advantages afforded to homeowners, buying a home also can be one of the best financial decisions you’ll ever make. Problem is, many would-be homeowners remain renters simply because they mistakenly believe mortgage lenders require that buyers come up with 20 percent of the purchase price as a down payment. While it’s true lenders feel it’s less risky to work with buyers who are able to bring a substantial down payment to the table, the standard 20 percent requirement is fast becoming a relic of the past. In recent years, lenders have become more flexible in working with first-time homebuyers by creating a variety of special programs that require only a small down payment. These programs, combined with the most favorable interest rates in two decades, have encouraged growing numbers of renters to consider the tremendous benefits of home ownership.

Private Mortgage Insurance: Most major lenders offer privately insured mortgages, which generally require a 10 percent down payment (although some lenders offer loans with a 5 percent down payment to buyers with exceptional credit). These loans typically are not limited by maximum loan amount or purchase price limitation.

While the list of programs offered by individual lenders is too extensive to mention in detail, here are some common programs you are likely to come across as you work with your real estate agent to purchase your first home: Federal Housing Administration (FHA): FHS mortgages allow homebuyers to purchase a home with as little as a 5 percent down payment, and to finance all non-recurring closing costs. The current maximum loan amount in most urban markets is $151,725. In addition, borrowers are allowed to use up to 41 percent of their gross income toward paying mortgage debt – well above the ratio allowed under most private programs.

Mortgage Revenue Bonds and Mortgage Credit Certificates: Mortgages funded with these instruments typically require a minimum of 5 percent down and have interest rates that are 1.5 to 2 percentage points below conventional 30-year fixed rates. These types of loans, offered by state and local housing agencies, are available only to first-time homebuyers. There generally are income and purchase price caps that vary, depending on where you plan to buy.

Department of Veterans Affairs (VA): VA mortgages allow veteran or active service personnel purchase home with no down payment, up to the current maximum price of $184.000. However, there is no purchase price limitation for buyers able to make a down payment. Like the FHA program, VA borrowers can put up to 41 percent of gross income toward their mortgage debt.

Clearly, there are a lot of options for first-time homebuyers. While lenders will be more than happy to share information about their own programs, you can save yourself a good deal of time by first selecting a professional loan officer who is experienced in working with first-time buyers in the areas where you plan to buy. An agent who focuses on first-time buyers will know from experience which lenders in your area offer a low down payment program that will meet your unique needs. Today, taking the first step toward owning your own home is easier than before. Your real estate agent is your best resource for finding innovative ways to help you come up with a down payment and qualify for financing. There’s certainly no need to wait until you’ve saved a 20 percent down payment!

Piggyback mortgage strategies incorporating up to 80% first mortgage and up to an additional 45% in the form of a second mortgage or equity line of credit can allow borrowers with all types of credit to own a home with no money down.

In the case of many of today’s lenders, there may not be any down payment required. Lenders are constantly looking at making more and more programs available to people looking to purchase a new home. Lenders are willing to do 100% loans, with a credit score of 560 or better. This may not be the best option, that is why it is best to know that there are several low down payment programs, that may also be available to you.

In addition there are down payment assistance programs that can help with thousands of dollars for down payment and closing cost. Most cities have grant programs available that don’t have to be paid back.

Community Homebuyer Program: Through their networks of mortgage lenders, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) offer Community Homebuyer Program loans. These programs require a 5 percent down payment, 3 percent of which may be a gift. To further help buyers qualify, applicants may use 38 percent of their gross income. Currently, the maximum loan amount available through these programs is $203,150.

One of the main benefits of buying a home vs. renting a home (or apartment) is that your mortgage interest that you pay each year is tax deductible. This can help at tax time to get more money back from the IRS. Another advantage of buying vs. renting is that with buying a home you are actually investing your money into a fairly safe investment. Unlike renting, when you are basically just throwing your money out the window.

Ask your mortgage professional to provide you a detailed analysis of the benefits of buying vs. renting. You will see many benefits of buying.

Another benefit in buying a home instead of renting is that you will be building equity. Your equity can later be turned into cash.

Owning your home vs. buying represents much more in terms of freedom and security. Very few renters actually realize that on a month to month rental the landlord can ask them to leave with only 30 days notice. This can usually be done without cause, meaning that they normally would not need a reason to do this. In many cases, rental properties have restrictions on how many persons may live in the property, pets, number of automobiles allowed, and many other things that can affect the way the renter lives.

There are many rent vs. buy calculators available online that will help demonstrate the advantages of homeownership compared to your current renting situation. These calculators provide all different kinds of information such as tax savings, equity gained, and a breakdown of differences between the payments.

Another advantage to buying a home is that you are locking into a payment. As in most cases rent will increase yearly while your mortgage payment may stay the same up to 30 or 40 years.

Keep in mind that owning a home has many responsibilities too that renting does not. A homeowner needs to upkeep the home. If the furnace goes or the hot water heater quits a homeowner needs to take care of these items. As a homeowner you must make sure that your property taxes and homeowners insurance get paid. Also, as a homeowner you must upkeep the exterior of the home, the yard, landscaping etc… While these responsibilities do exist for a homeowner the benefits of owning your own home still outweigh and are much more rewarding than the benefits of renting. Your home should always appreciate in value and you are going to basically make money simply for living there and making your monthly housing payment.

For many people, psychological and emotional factors drive their decision to stop renting and buy a home. These factors include pride of ownership, a feeling of establishing roots, a desire for a place to raise a family, desire for privacy, and freedom - freedom to paint your walls any way you want, freedom to barbeque on your own back porch, freedom to play with your dogs in your own back yard.

Other sites: Loan Officer | Stated Income Loan | How To Choose A Real Estate Agent | Delinquency | MIP | Closing Costs | Selling your home with a real estate agent| Pay Option Arm Calculator

The term Appreciation as applied to homes and mortgages refers to an increase in the value of a property.

Let’s look at some numbers to put this in perspective and show you why appreciation makes real estate such a good investment. Take a 200K home bought for full value with an appreciation rate of just 5% per year. Year 1 - 200,000Year 2 - 210,000Year 3 - 220,500Year 4 - 231,525Year 5 - 243,101Now is it starting to sink in why appreciation is a key factor in Real Estate?

You may realize appreciation on a property due to a positive improvement in the property, the area, or the removal of another negative factor.

Appreciation is the increase in value of your home. This is one of the many benefits of home ownership. Many homes have seen double digit appreciation in the last several years.

Commonly, and incorrectly, used to describe an increase in value due to inflation.

One major misconception that many homeowners/consumers have is that appreciation represents some type of monetary performance of the equity in their home. Appreciation takes place whether a homeowner has 0 equity or $200,000 in equity. The appreciation is obtained from increased market value of the property. The equity, when trapped in the home is “lazy” - meaning it is not a performing asset.

Many of the savviest real estate investors know that the key to building their fortunes by using the equity in their homes as the foundation is to separate the equity from the home at a good valuation, and use this substantial liquidity, which is often borrowed at a fraction of the market rate of return in alternative asset classes, to invest in equities, commercial real estate, and most profitably in their own small businesses, yielding a substantially higher return than the nominal interest rate on the money they’ve cashed out of the home. This is a trick copied from big business and can be the cornerstone of a powerful wealth building strategy for homeowners who aspire to financial freedom.

The rate of appreciation differs depending on the area some areas appreciate faster than others but given time your home will go up in value.

If you feel that your home has appreciated a good amount, you should consider refinancing your current mortgage to get money out, or to get more favorable mortgage terms.

Other sites: Broker Outpost | VA | New Credit Card Minimum Payments | How To Choose A Real Estate Agent | Delinquency | Cash-Out Refinance | AZ Mortgage Source| Pay Option Arm Calculator

A mortgage in which the repayment of principal is done over a 40-year period, rather than the traditional 30-year period, in order to reduce the monthly payments. The rate on a 40-year mortgage can be fixed or adjustable.

While 40-year mortgages increase affordability by reducing the mortgage payment, the reduction is very modest. Furthermore, a small tweaking in the 30-year mortgage would accomplish the same thing, maybe better.

40 year mortgages are increasingly popular with customers who are refinancing their home mortgage as part of a debt consolidation strategy, allowing them to borrow marginally more money, eliminating high revolving debt payments, while still maintaining a payment which is similar to what they were paying before on their 30 year mortgage payment.

40 year mortgages are becoming more popular as homeowners are constantly looking for more affordable ways to own homes.

Other alternatives to the 40 year mortgage are option arms, interest only arms, and interest only fixed mortgages. Ask which one is right for you.

In many cases the 40 year amortized loan will have a better rate than an interest only payment. If the 40 year payment is just slightly higher than the interest only payment, opt for the 40 year payment because you will be paying down some principal.

The 40-Year Mortgage allows for principal reduction but at a significant lower payment to borrower. The difference in payments can be pretty significant. For example, on a $500,000 mortgage financed over 30 years at a fixed rate of 5.875% costs $2957.69 a month. But the monthly principle and interest payment drops $2707.63 on a 40-year schedule. That is over $250 less in your monthly payment.

One of the disadvantages of a 40 year loan is that the homeowner builds equity at a much slower pace. For first-time buyers counting on equity accumulation to eventually move up to another, larger and more expensive home, this slower pace of equity accumulation is a liability and may leave some people sadly disappointed.

The 40-year mortgage is more attractive than interest-only loans because borrowers build equity in their homes, albeit at a sluggish pace, and they are not vulnerable to rising interest rates.

You should ask your mortgage broker whether or not this loan makes sense for your situation. A professional will be able to provide loan programs that he or she thinks are of the most benefit to you. Remember though that this is your mortgage, and you have final say. If you are absolutely sure that a 40 year mortgage is for you, then your broker should be glad to help you get it.

For renters who cannot afford a 30-year mortgage and still want to own their own homes, a 40-year amortization mortgage is often a good solution. In many metropolitan areas, the average rental cost for a single family residence is about the same as the monthly payments of a 40-year amortization mortgage with conforming loan amounts. Renters in these areas can often afford their own homes after all. However slow homeowners with 40-year mortgages build equity, they do contribute to the equity of their own home nonetheless.

If you run the numbers using a mortgage calculator you will be able to see the benefits of home ownership vs. renting and it may make sense to acquire a 40 year amortization loan. It is much better than throwing your money away on rent each and every month.

While fixed-rate mortgages remain attractive by historical standards, borrowers looking to keep their monthly payments down are running out of good choices. Some borrowers may consider products such as option ARMs and interest-only mortgages.

The shinning feature of a 40-year fixed-rate mortgage is that monthly payments are more affordable without taking on the risk of an ARM. This is of particular interest to buyers in high-cost areas. The 40-year fixed mortgage may also appeal to buyers with small down payments. The monthly payments on large loan amounts are accomplished by spreading amortization (the repayment term) by an extra 10 years. However, before you begin to think that this is the greatest loan ever, keep in mind the difference in payments may not be as much as you think. Be sure to have your loan professional run the numbers for you and compare with other loan products.

One twist to the 40 Year mortgage that you may want to watch out for is a 40 year due in 30, What this means is you will have a balloon payment due at the end of 30 years. This is not a bad thing considering most homeowners will most likely refinance before 30 years.

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