What Kind of Mortgage Loan Should I Get?
The question of what kind of mortgage to get can cause serious confusion for home buyers.
When you are searching for your dream property, it is easy to get swept up in the excitement of it all. However, if you want that dream to become a lasting reality, it is important to make the right choices from the get-go.
Before you choose your mortgage, start by knowing the basic conditions of each kind. The object then is to match the right mortgage to your long-term financial situation. If you can’t afford to keep up with repayments, you risk losing everything you worked so hard to gain.
A fixed-rate mortgage is where you pay the same amount of interest each month throughout the loan term. The concept is simple and the majority of home buyers, whether experienced or not, will have heard of this kind of mortgage rate.
You can set your budget for the length of the mortgage, surely knowing your rate will never change. If you come into a large amount of disposable income while paying off the loan, you may also have the option of paying extra to reduce the length of the initial agreement. Typically, fixed-rate mortgages are set at 15 or 30-year terms.
An adjustable-rate mortgage (ARM) usually has a set initial rate that will stay the same for a number of months or years before adjusting according to an index. Once the fixed stage of the loan has been reached, the interest rate will rise and fall, depending on a number of factors.
Many home buyers opt for an ARM when there is an expectation they will sell before rates rise, or because rates are anticipated to fall. There is an element of risk with an ARM, however, as there is no guarantee either of these scenarios will play out as expected.
The Federal Housing Authority backs mortgages for first-time home buyers under certain circumstances. There are specific requirements you must meet to qualify for an FHA loan.
In most cases, an FHA loan is for a primary residence that is occupied by the home buyer. This means you cannot use the loan if you intend on investing in or renting the property. There is also a maximum loan amount that is dependent on the statutory limit for the market, as set by the FHA.
The benefits of an FHA loan include low minimum down payment, at a rate which is determined by your FICO score. If your score is above 580 you will enjoy a rate of 3.5%. Otherwise, the rate is set at 10%. Credit expectations for FHA loans are typically good and there is more flexibility when it comes to income.
A conventional mortgage is based on a loan that is not governed, guaranteed, or insured. You won’t pay any insurance upfront and so long as the down payment is in excess of 20%, there is no monthly insurance requirement, either.
This is the type of mortgage that would have been popular in previous generations, where the expectation was to secure a mortgage for life. These types of loans are based on the same guiding principles as the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Corporation (Fannie Mae).
Jumbo Mortgage Loan
The mortgage loan is a means by which homeowners can acquire a dream property that would be otherwise out of reach. Your debt-to-income ratio is taken into consideration to determine whether you have the financial security to pay a larger loan over the term. The higher the down payment the more likely your chances are of securing a jumbo mortgage loan.
However, the fact you want to purchase an expensive home should not mean automatically opting for a jumbo mortgage loan. You will want to look into a conventional loan and check the rate based on your maximum down payment amount.
Help & Guidance
There are various kinds of loans available to home buyers. In order to ensure you choose the most financially viable option for you, it is important to seek professional help and guidance. At Galaxy Lending Group we are committed to providing our customers with all the information and tools they need to secure their dream property.
No matter what your circumstances are, you deserve a home for you and your family. There are numerous programs and resources available to buyers when you know where to look. Our team can help you navigate the property market and provide invaluable loan advice along the way.
For a free consultation, contact Galaxy Lending Group today, and speak to a friendly and experienced member of our team. With our help, your perfect property is just around the corner.