Finding the perfect home is just the start; selecting the right mortgage is just as important.
Choosing wisely could save you thousands over the loan's lifetime. Whether you're a first-time homebuyer or a seasoned homeowner, it's important to find the right loan to fit your budget and needs. Here are some popular options to consider:
30-Year Fixed-Rate Mortgage
A 30-Year Fixed-Rate Mortgage ensures that your interest rate will not change. This makes it easier to budget on a monthly basis because your interest rate will stay the same over 30 years, regardless of changes in the housing market. Many homebuyers favor this option for the long-term security it provides.
15-Year Fixed-Rate Mortgage
A 15-Year Fixed-Rate Mortgage must be paid off in half the time of the 30-year option, but it’s a popular choice that can quickly build up equity and give the borrower a lower interest rate. It can also be beneficial for those seeking to retire within 30 years, as they may not have to make repayments in retirement.
Conventional Loan
A Conventional Loan is not insured or guaranteed by the government, which means they offer fewer restrictions and allow lenders to build terms specific to their borrowers. Conventional Loans request smaller down payments, as little as 3% of the total cost. Furthermore, loan processing can be faster than government-backed loans. Lenders can offer flexible term lengths between 10 and 30 years. Lenders are at a higher risk with a Conventional Loan and thus may require private mortgage insurance (PMI) if the borrower puts down less than 20% on the property.
FHA Loan
An FHA Loan is a mortgage insured by the Federal Housing Administration, backed by the federal government, and is often a viable option for homebuyers who do not qualify for a Conventional Loan. FHA Loan requirements vary depending on individual loan types but generally a lower down payment is required and buyers with lower credit scores can qualify. An FHA Loan may also be suitable for self-employed individuals with unique income streams.
VA Loan
A VA Loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs. They are offered exclusively to active-duty and Veteran service members. The benefits of a VA Loan can be exceptional: lower interest rates, no required down payment, no prepayment penalty, and no monthly mortgage insurance premiums.
ARM
An Adjustable Rate Mortgage (ARM) can offer upfront savings if the loan’s initial interest rate is lower than fixed-rate mortgage types. ARMs may come with a fixed period where the interest rate remains the same and then after that period the rate adjusts to the market. This can benefit borrowers who move frequently, plan to refinance before the loan adjusts, or expect to earn more income in a few years. Keep in mind that ARMs can become more expensive if interest rates rise.
I CAN Mortgage
An I Can Mortgage allows borrowers to negotiate the term length by working with a team of mortgage professionals to determine what works well within a set budget. This mortgage can build home equity faster with the option to refinance later to a lower interest rate and shorter term. Due to the flexibility of the loan, borrowers can tailor their mortgage to suit their current and future needs.
Reverse Mortgage
A Reverse Mortgage is for anyone over the age of 62 who want to turn some of their home’s equity into cash. Homeowners can better manage their retirement finances by using their built-up equity. The lender pays the borrower each month. The borrower does not have to pay this Reverse mortgage back until the home is sold, vacated, or the homeowner passes away. A Reverse Mortgage does not require a credit score to qualify.
