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Some Mortgages Are Better Than Others

By: N. Messe Click author's name for more of his/her articles

As life moves on at an ever increasing pace, so do our needs. Each day, we try to fulfill the demands from our family, friends, and others. It is not always possible to have enough cash on hand to meet all such needs. When it comes time for a family to purchase a home, thank goodness there are mortgage loans available.

There are a number of different specialty loans available to first time home buyers. These include government backed mortgages, Federal House Administration (FHA), Rural Housing Service loan programs (RHS), and VA mortgage loans. However, the mortgage that does not fall in any of these special categories is what is called a conventional mortgage. Conventional mortgages are not guaranteed by any department of the government and as a result it is relatively difficult to qualify for a conventional loan. Also the down payments you require to make in this case are quite large as compared to the other ones.

Even so, whether you are a Chicago first time home buyer or not, conventional mortgage loans are still the most preferred kind of mortgages for home loans. This is because the guidelines that are used are based on good, sound accounting and banking principles. They take into account what the property you wish to purchase is realistically worth, and whether you can take on the responsibility of the monthly payment. You can use the help of a loan officer to determine the kind of mortgage you need to properly fund your needs.

For a number of years, people were deceived into believing that subprime mortgages were a better option than going for a conventional mortgage. Seen as an easy alternative that promised lower payments, subprime mortgages were originally designed to help those people who failed to qualify for a conventional loan. Starting with a lower interest rate for the initial period of 2 to 3 years, and often requiring virtually no down payment, the theory was that a subprime mortgage would help first time home buyers get into the housing market, help them build their credit ratings and make it possible for them to eventually move on to a conventional loan. However, the hidden dangers were not understood.

Misled into believing that they would gain huge advantages by opting for these loans, many first time home buyers - including thousands of Chicago first time home buyers - signed up and this led to the boom era in the United States housing market. However, soon people discovered what they should have known all along about subprime mortgages. Eventually the chickens come home to roost.

What they didn't pay close enough attention to was the fact that after this initial period the loan actually soared to make up for the initial low rates. This is when large numbers of homeowners began defaulting on their mortgages, and why in some cities in the US you find whole neighborhoods of empty, repossessed homes. In fact, the US subprime mortgage market played a huge role in the current global financial crisis that has gripped most markets throughout the world.

Once you decide to get a mortgage, always make sure that you consider the long-term repayment terms rather than just looking at the immediate picture. You need to give yourself some financial breathing space by settling on a legitimate plan that helps you to repay gradually and consistently. It is important that you do not take on more than you can handle if the market changes or interest rates go up. If you don't plan ahead you may find yourself with a home you can't afford.

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About The Author: If you are a Chicago 1st time home buyer you need mortgage advice you can count on. Call 773-305-LOAN for a free quotation without obligation on a Chicago 1st time home buyer mortgage or mortgage refinance.