Posted on: 27 December 2021
When you finally decide to purchase your dream home, one of the top questions on your mind will be 'which type of mortgage is best for me?' Unfortunately, this question doesn't have a specific answer.
You see, what worked for a previous home buyer may not work best for you. It's advisable to go through all the mortgage loan options to see which one appeals to you the most. Also, here are three main factors you can consider to ensure the decision you make is the best.
Assess Your Situation
Before settling on any mortgage loan, think carefully about your situation and needs. The loan you pick should serve your unique circumstances. The two most important factors to consider in this case are potential home cost and your financial well-being.
The potential home cost will be determined by, among other factors, where you're looking to buy your home. If you're looking for a house in a posh neighborhood, you will likely incur high mortgage payments. Some places have cheap houses but may lack in other key areas like security and social amenities. Hence, consider where you want to settle and home costs in the area.
Regarding your financial well-being, you should consider how much money you have for the down payment and your credit history. If you can afford a large down payment, you may be able to pay less in interest rates. Similarly, you may qualify for a mortgage loan with lower interest rates if your credit score is high.
Consider the Length of Your Mortgage Loan
You may have heard of a '30-year mortgage' but are afraid of making such a long-term commitment. Luckily, that's not the only choice you have. There are also 15-year and 10-year mortgage loans if you want to be done with the mortgage faster.
With short-length loans, you are also likely to enjoy a better mortgage rate and a reduced total interest amount over the life of your mortgage. Still, if you believe a 30-year mortgage loan suits you best, go for it. What matters is that you're comfortable with the terms of the mortgage you are choosing.
Understand Mortgage Interest Rates
There are two main options for mortgage interest rates: a fixed-rate mortgage and an adjustable-rate mortgage (ARM). With fixed-rate mortgages, the interest rates and the mortgage payments will remain the same throughout your loan. But with ARMs, the interest rates can be quite low initially but will change over the course of your loan, causing a fluctuation of your mortgage payments.
Your length of stay in the house may determine the right interest rate option for you. If your plan is to move within a short period, an ARM may be your best option as the initial guaranteed rate is often low. For a long-term stay, a fixed-rate mortgage may work best due to the stability of payments.
For more information on mortgages, contact a company like Christy Christian Home Loans.Share