Ready to buy a home? There are a lot of things to consider. Is the market recovered enough? What should my down payment be? Do I need a down payment at all? And most importantly, what mortgage should I choose?
By the time we finish paying off our homes (if that happens in your lifetime), often we have paid way more than the purchase price because of the mortgage we selected and the interest rate we got. Shopping around for the best mortgage possibility is important, considering that buying a home will probably be the biggest financial decision of your life.
Lets take a look at some aspects of a mortgage.
There Are Different Kinds of Mortgages
There are a number of different mortgage products out there, so you will need to do some homework. Things to research and consider include what bank, savings and loan, mortgage bank, finance company or credit union offers the best terms for that type of loan.
The Internet makes this process a lot easier these days — but research will need to be done and questions will need to be asked. There is no bad question, so ask whatever you need to. Your loan officer and your real estate agent should help you.
While there are different mortgage products and companies available, most mortgage products fit into one of the following categories:
Fixed Rate Mortgage: Traditional loans that have a fixed interest rate over the life of the loan, typically 30, 20, 15, or 10 years. Down payments required on these loans can be as low as 5%. These are predictable payments that many are comfortable with.
Adjustable Rate Mortgage: This type of mortgage starts at a lower interest rate and provides a lower payment, which you may enjoy. However, you are always open to interest rates and payments fluctuating based on market rates.
Balloon Mortgage: The balloon mortgage should really only be used if you know you will be moving in around 5-7 years. A lower interest rate is given, and you don’t have to worry about fluctuating interest rates. However, the entire loan is due in that specified 5-7 year timeframe, which doesn’t give you much time to pay the entire loan off. If you can’t finish loan payments in that amount of time, then you may find yourself taking out a second mortgage to cover this first one.
Jumbo Mortgage Loan: The term “jumbo loan” pretty much speaks to exactly what the loan is. It is a loan that is bigger than the regular home loan. Most lenders follow the Fannie Mae and Freddie Mac guidelines when it comes to the maximum amount you can borrow. If you need to borrow more than allotted, then you should look into a jumbo mortgage loan.
Search for the best interest rates and the best available mortgage terms. You need to do your homework and figure out what type of mortgage fits you best when it comes time to purchase a home.