As a homebuyer, there are many options for your loan. Everyone is different – the best option for you may not work for someone else. There are many factors that go into deciding what is best for you. For some, it may be twenty percent down, for others, they may need down payment assistance. How long you plan to live in the home can also make a difference in the type of mortgage you use.
You need to decide how long you think you will be in the home. There are fixed rate loans and adjustable rate loans. Most buyers decide to use a fixed rate loan, especially if they think they will be in the home for several years. For some that know they will be moving in 3-5 years, it may make more sense to use an adjustable rate mortgage that is fixed for a short period of time. Maybe a 5/1 ARM or a 7/1 ARM – that way they get a fixed rate for 5 or 7 years and then it becomes an adjustable rate. Usually the rates are lower on a 5/1 or 7/1 ARM than they are on a fixed rate loan. This can save you money if you do move before it becomes an adjustable rate.
A fixed rate loan gives you the security of knowing your interest rate will not change and it helps stabilize your payment. Your taxes and insurance may change, but your principal and interest payment will not.
For those that need assistance with a down payment, there are many state and county programs available. This allows you to get into a home with less down and may help you buy a home sooner. Many down payment assistance programs only require you to put $1000 into the transaction and the down payment assistance is paid back when you sell the home or pay off the mortgage. Most of these mortgages are fixed rates to help you budget your payment.
For those that have the ability to put more down, you can look at the best option for you – do you need to save some of your money for upgrades or repairs to the home you are buying? Decide whether it makes more sense to put more money down or keep some for any changes you may want to make. Depending on your credit score, mortgage insurance can be very inexpensive, so don’t worry too much about paying mortgage insurance.
Your best option is to talk to a loan officer and decide what makes the most sense for you. Everyone is different and what worked for your friend or family member may not be right for you. Look at the options and make the best decision for your own situation!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
