When shopping for a mortgage, there are a wide variety of loans you can choose from. Unfortunately, for some people, the mortgage is the only way to get the roof over their head. But, this doesn’t mean you should get the first mortgage the loan officer presents you.
There are a couple of factors, such as type, length, and interest rate, which determine whether some mortgage is right for you or not. It is essential to consider all options and then make a decision that will benefit you the most.
For that reason, we have taken some time to go through various option and help you find the best mortgage.
Fixed vs. adjustable interest rates
When considering different types of mortgages, you will be asked to choose between flexible and fixed mortgage rate. With the fixed-rate, you will be obligated to pay the same amount through the entire length of the mortgage.
On the other hand, the adjustable interest rate will offer you initially a slightly lower interest, but it will adjust over time. Keep in mind that contract will specify how much the lender can raise the interest rate each time. As the rate goes up, so will your monthly installments.
FHA loan vs. traditional mortgage
If you are purchasing your first property, or you haven’t had a mortgage in the last three years, then you may qualify for an FHA loan. This type can assist you with the closing costs or may reduce the amount you have to put down when buying a house.
However, the choice you make may depend on your current situation. By saving money for a down payment and putting down 12%, you are showing yourself that you are a financially responsible person. On the other hand, this doesn’t mean you should eliminate FHA loan or other first-time home buyer’s services.
Terms of the mortgage
In some way, the mortgage can determine the course of your life. So, it’s crucial to decide on the terms and conditions of the loan carefully. However, the shorter the terms, the lower the interest rate is. But, this usually involves high monthly installments, which many people can’t afford.
In this case, you should take some time to consider different terms and conditions and then decide whether your monthly budget allows you such investment. The shorter loan will enable you to pay off your property faster and helps you free up money for future investments.
Shopping for mortgage
Hiring a mortgage broker is one of the easiest ways to find a suitable loan. A broker works with different lenders to help you find the best terms and interest rates for your mortgage. Also, the mortgage broker can evaluate and weigh all options, as well as, assess your financial situation.
The bank or credit union can offer you similar services, or you can hire an independent broker that can help you find good loans. But, keep in mind that some loan companies might charge you penalties if you pay off the loan within the first three years.