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Finding the Best Mortgage Rates in 2016

Author: Ethan Williams

Buying a home may be the biggest and most important financial decision of your life, and will likely require a mortgage to fund the purchase. As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online. To help you get started, in addition to a brief tutorial on how to shop for a mortgage, the mortgage calculator tool below is a good way to familiarize yourself with the different types of mortgages available in your area for the 2016 calendar year.

The calculator comprises multiple factors to help you narrow the options best suited for your specific needs. You can compare payments between short and long contracts, evaluate a lower initial interest rate on an adjustable-rate mortgage (ARM) versus a more traditional fixed-rate option, or whether an interest-only (I-O) mortgage makes the most sense for you.

Below is a list of factors included in the mortgage calculator:

Credit Score: The credit score is the numeric expression of a person's creditworthiness.

Location: You must select the state in which the mortgage will be taken, and then narrow the location by either the closest city or ZIP code.

Loan Amount: The estimated value of the home or the remaining balance on your incumbent mortgage that you would like to refinance.

Mortgage Points: A mortgage point is equal to one percent of the total amount of a mortgage. There are two types of points: discount points, which represent pre-paid interest on a mortgage; and origination points, which are a fee the mortgage lender may charge a borrower.

Percent Down: Also known as a down payment, or an initial payment made when something is bought on credit.

Products: The type of mortgage you are interested in, such as a traditional fixed-rate mortgage, an ARM, or an I-O mortgage. The ARM option shows a ratio such as 7/1, which represents the amount of years the mortgage carries a fixed interest rate. After the pre-set number of years, in this case 7, the interest rate adjusts according to three factors: the level of the index that the mortgage is tied to, such as the LIBOR; the ARM Margin established at the onset of the loan; and the Mortgage Cap.

Purchase or Refinance: Purchase mortgages are used to finance the purchase of a home. Refinances are used to replace an older loan with a new loan offering better terms, for a fee.

The Bottom Line

Due in part to the accommodative stance that the Federal Reserve has taken to its Federal Funds Rate, the past five years have represented an ideal period to invest in a mortgage. This is due to the generally lower interest rates now available. Although the Federal Open Market Committee just announced its first increase to its benchmark rate in nearly a decade, the 2016 calendar year should still provide ample opportunity to lock in a new mortgage or refinance your existing one.

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