Whether you are a first-time homebuyer or are ready to find a property to upgrade or downsize to, it is important to know how much house you can afford and what type of mortgage is right for your situation. Choosing the right mortgage is one decision that can save you thousands of dollars. Working with a mortgage expert at The Home Loan Arranger will ease the process of selecting the best loan to meet your needs and goals.
Conventional mortgages are home loans not insured by the federal government. These are great for house hunters who have a strong credit score, steady income, and the ability to make a three percent down payment. The overall borrowing costs tend to be lower than other types of mortgages.
Fixed-rate mortgages have an interest rate that remains the same for the length of the loan, which means the principal and interest payments will be predictable from the first payment to the last. Fixed-rate loans have repayment terms of anywhere from 10 to 40 years. This type of mortgage works well for people who plan to live in the same home for several years. It is also a good option if interest rates are expected to rise.
Adjustable-rate mortgages offer interest rates that vary based on changes in market interest rates. These mortgages are usually offered with 30-year terms. Typically, the initial rate for an adjustable-rate mortgage is lower than for a fixed-rate loan, making it a good choice for people who are not planning to own the home for a long time period or who plan to refinance before the loan resets. Since interest rates tend to be lower for adjustable rate mortgages, buyers who go this route can potentially save thousands on interest payments in their first years of homeownership.
Government-insured mortgages include loans backed by the Federal Housing Administration (FHA), United States Department of Agriculture (USDA), and the United States Department of Veterans Affairs (VA).
FHA loans are a positive option for people who are unable to make a large down payment, have a not-so-great credit score, or who do not qualify for a conventional loan. However, since FHA loans require two mortgage insurance premiums – one paid up front and one paid annually for the life of the loan – this type of mortgage can end up being more expensive in the long run.
USDA loans are ideal for moderate- and low-income homebuyers in some rural and suburban areas. USDA loans require little to no money down for eligible buyers. For those who are eligible, the USDA is a mortgage option with favorable terms.
For active-duty and veteran members of the military and their families, VA loans offer flexible, low-interest mortgages. A down payment and private mortgage insurance (PMI) are not required with VA loans, making it a favorable option for home buyers. However, a funding fee is charged on VA loans. Borrowers have the option of rolling that into the loan or paying it upfront at closing. Funding fees for VA loans vary depending on the loan amount and a person’s military service category. Some service members, such as veterans receiving VA benefits for a service-related disability, are exempt from paying the funding fee.
An appropriate loan with the best rates and fees will save you significant money up front and throughout your lifetime. If you would like more information about choosing the right mortgage for your situation, please contact The Home Loan Arranger to schedule a free consultation. Find valuable support with an experienced mortgage broker at The Home Loan Arranger.