Unless you are purchasing your new home in cash, you are going to need a mortgage. You might think that mortgages are pretty standard, but the truth is there are hundreds of different mortgage options out there. Choosing the one that’s right for you is going to depend on various factors such as your income and lifestyle and your plans for the future. Don’t let the options overwhelm you; doing your homework and working with an experienced mortgage expert can help you to quickly narrow down the choices and find the mortgage that’s perfect for your new home. If you’ve started looking at houses for sale in Hamilton, then now is the time to start looking at mortgage options, too.
Start your research here by learning more about four of the most popular types of mortgages and whether or not they are right for you.
Common Mortgage Types
A fixed-rate mortgage has just one interest rate throughout the life of the loan, which is typically 30 years. If you buy your home at a time when interest rates are especially low, this can be a terrific option to ensure that you keep that low-interest rate, thus keep your monthly payments lower, too. You’ll end up paying a higher initial rate than you might with other loans, but you’ll also know exactly what your monthly payment amount is going to be and won’t be surprised when an introductory rate wear off. If you plan on staying in your new home for long period of time (five years or more), fixed rate mortgage often make the most sense.
You’ll often see an adjustable rate mortgage abbreviated as an ARM loan. These loans offer a lower introductory interest rate for the first couple years of the loan, usually two to five years. After that, the interest rate increases, as does your monthly payment. This can be a good mortgage option if you plan on selling your home after a relatively short period of time (while that introductory rate is still in effect). So, if you are flipping the house or plan on moving up the property ladder relatively quickly, an ARM loan could be a good thing. If not, though, just be sure you can still afford the monthly payments when your initial interest rate jumps up. This will be disclosed in the terms of the loan, so there shouldn’t be any unexpected surprises (just be sure to mark your calendar for the end of the introductory rate period!).
Federal Housing Authority loans can be a great option if you are having trouble purchasing a home through traditional mortgage options. FHA loans are more lenient on mortgage requirements such as your credit score and having a large enough down payment. You can actually purchase a home with just 3.5% down on an FHA loan. These mortgages are possible because they are backed by the government. That means if the loan is defaulted on, the lender won’t lose any of their money. There are downsides to an FHA loan, however. First, there are limits to how much money you can borrow for the purchase of a home. Secondly, you’ll be looking at higher interest rates and may need to pay private mortgage insurance, meaning your monthly payments could be higher than what you’d pay through a traditional loan. For some people, though, an FHA loan is key to getting them out of the rental market and onto the property ladder.
If you or your spouse served in the armed forces, you should look into getting a VA loan to purchase your home. These loans started back in 1944 and have been popular ever since. VA loans offer a lot of great benefits, including low-interest rates, no private mortgage insurance, and often you can purchase a home with as little as $0 for a down payment. The only downside to these loans is that there are strict requirements both for your credit and the kind of home you are purchasing. However, it’s still definitely worth checking out because it could end up saving you a lot over the lifetime of your loan.
This is another, albeit rare, mortgage option that you can consider. With this type of mortgage, you’ll be paying only the interest that accrues on the loan. That means you’ll have much lower monthly payments because you aren’t paying anything towards the principal amount of the loan. However, at the end of the loan term, you’ll have to pay the principal amount in total. So if you bought your home for $450,000, you’ll need to pay that total amount off at the end of your interest-only loan. These loans are rare now, but you’ll still find them available through some lenders. In most cases, you’ll need to demonstrate that you’ll have the ability to pay that loan off at the end of the term.
One More Mortgage Consideration
With all of these loan options, you’ll one to think about how long you want the loan. The vast majority of loans are 30-year loans. However, 15-year loans are also available. Shorter loan terms mean you’ll have your home paid off sooner, but you’ll also be facing a much bigger house payment. If you want to pay your home off sooner but aren’t comfortable being locked into a higher monthly payment, get a 30-year loan and consider making bigger payments when possible. Just make sure there is no early payoff penalty on the loan.
Get Help Choosing the Right Mortgage
For some people, choosing a mortgage is a simple, straightforward process. Maybe you have great credit and have found a home that you want to live in for decades to come. In that case, a fixed-rate mortgage is probably the best option. Unfortunately, purchasing a home is rarely that straightforward. You might have credit issues, trying to purchase a non-traditional property, or need help with the down payment. In all of these cases, there are mortgages that can help you overcome any challenges and get you into the home of your dreams.
The best option is to work with an experienced mortgage expert. They will be able to sort through all of the options and help you find a mortgage that works with your budget and your individual circumstances. Find a great mortgage advisor by:
- Asking your family and friends. If your family or friends have purchased a home in the last couple years, ask them who they used for their financing. If they had a good experience, make an appointment!
- Talking to your builder. If you are purchasing a new home, ask your builder for their recommendation. They may have a close relationship with a particular bank or mortgage company who can offer you a good deal because of your builder.
- Doing your homework. Look online for mortgage companies in your area and see what people are saying about them online.
- Meeting with them in person. Many mortgage companies are happy to make a consultation appointment with you. You’ll be able to go in and discuss your current situation with them and see what they have to say about your mortgage options. You’ll be able to see if they are a good fit and if they seem to be confident they can help you find the right mortgage option.
There are a lot of mortgage options available and a lot of companies out there who are offering loans. You’ll find one that’s perfect for you!
Looking for New Home?
Before you find the right mortgage, you need to find the right home. We are currently offering houses for sale in Waterford Creek, Loudoun Oaks, Clifton Point, Saratoga Towns, and Meadows at Great Falls. Visit our beautiful communities today and let’s find the right home so you can start working on the right mortgage.