Choosing a Mortgage: Which Type of Loan Is Best for You?
Choose the right option for you available at Intercorp Mortgage Solutions. |
There are many options in the market when it comes to choosing a mortgage. At this point, you probably have already decided that the next step in your financial life is buying a house. We know how important it is to feel comfortable while paying your home loan in the years to come!
As we always tell you, debt is not a negative thing if it is the price for a better lifestyle and an investment for your future. It takes time to search and understand which is the best type of loan for you. Especially with all the legal statutes, taxes rates, and credit history reports.
In this article, we want to make sure you have an idea of what mortgage options are out there, and be aware of the ones you do not want at all. Take notes of our considerations and once you make sense of everything regarding this subject, contact us at Intercorp Mortgage Solutions to help you with financial planning strategies and talk about the home loans we offer!
Federal Housing Administration loan
Known as FHA, this type of mortgage insured by the Federal Housing Administration exists to make buying a home more affordable to first-time buyers. It allows them to have a small down payment. Also, is not necessary to have a perfect credit score, but you probably will pay a higher price for mortgage insurance for protection. An advantage of this entity is that home sellers and lenders can pay some of the borrower’s closing costs as long as the lender is FHA-approved. Other relevant aspects:
- Borrowers can ask for extra cash to make repairs to their homes.
- FHA is not a lender, but rather an insurer.
- Lenders charge a higher interest rate on the loan once they agree to pay closing costs.
Fixed Rate
A fixed-rate mortgage is known for maintaining the same amount of interest and monthly payments during the period the loan lasts. It can be up to 15 to 30 years. In this sense, your lender cannot make any adjustments that would cause your monthly payments to change. All because it will affect how your balance decreases with each payment. If you depend on high rates to have the possibility of refinancing, you might risk the chance is they fall dramatically. You can also consider these criteria:
- More of your monthly payment goes toward the principal each month, that automatically increases your home equity
- The interest rate will be higher in comparison to others at the time the mortgage is approved. It is because lenders are going to need more in return during the term.
- If interest rates fall in the future, you still have to pay more.
- You will pay higher closing costs for a conventional loan.
Veteran Affairs Loan
This type of loan is available to current military service members and veterans only, thanks to the United States Department of Veterans Affairs (VA). A private lender will issue this mortgage with a lower interest rate and usually will require you not to make a down payment. If you are active-duty military, a veteran, a qualified surviving spouse of a deceased veteran, a reservist, a member of the National Guard or maybe you retired from military service, you are in entitled to apply for a VA mortgage. These are a few of its conditions:
- The home must be your primary residence
- VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.
- With this loan, you can refinance an existing VA-guaranteed or direct loan if you want a lower interest rate.
Adjustable Rate Mortgages
If interest rate adjusts at a specified time and frequency, you have to pay that amount with your monthly payment. An adjustable-rate mortgage (ARM) adapts to market trends, while your lender will offer you a lower initial rate. By choosing this type of mortgage, consider that you will be able to sell and pay off the mortgage before the rate gets too high. In fact, planning on selling your home in a given time make sense due to that risk. But always be prepared to pay more if the market trend skyrockets after you buy your ARM. Please take note of these statements:
- The rate changes once each year for the entire term of the loan.
- You can buy a bigger house for less with lower interest rates at the beginning.
- If your income is the same when rates increase, you may no longer be able to afford your home and could lose it.
Yes, they all have advantages and disadvantages, but there is probably one that is the perfect fit for your financial situation. Let us know your doubts as we consider what your best option based on your records is. At Intercorp Mortgage Solutions, we will be more than pleased to help you buy your dream home!
A mortgage lender can offer you guidance if, at this point, you still don't know what to do. |
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