Congratulations. You’ve finally decided that you want to buy a house. You’ve gotten yourself approved, and now you need to decided which type of mortgage is right for you.
Below is a brief outline of the 4 different types. (To get a full explanation of these mortgages, you can visit the sites below, or talk to your mortgage lender or lawyer).
The Fixed Rate Loan is where the interest rate stays the same for the entire length of the mortgage. If you plan to stay in your house for 15-30 years, this could be a good option because the monthly payments are easy to budget and your payments are predictable.
An Adjustable Rate Loan starts with an interest rate which is normally lower than a conventional fixed rate loan, and after a specific period of time (ie 3,5,7, etc years), the rate will change to whatever the current market conditions dictate. As the rate changes, you monthly payment changes. So if you feel that you’re in an abnormally high interest rate period, and you think that in the upcoming years the rate is going to drop substantially, you may wish to try this option. With this option, you may feel safer if your mortgage is for a shorter period of time. And sometimes these loans have a limitation on how much an interest rate can go up or down, thus once again protecting you.
Jumbo Loans are for people who need large amounts of money.
And finally, there are home mortgage loans for first time home buyers. You can maybe take advantage of FHA or VA government loans based on your income or property location. You may be able to qualify with less income and incur no down payment.
When choosing your home mortgage loan, the things to consider are:
1) how many years do you want the loan to last,
2) how much can you afford to pay each month,
3) your spending habits,
4) your anticipated income over the term of the mortgage and,
5) how long you plan to stay in the home.
Home Mortgage Loan: Things you must know!
