It can be exciting when you’re thinking of buying a home. This is especially true if you have found your dream home and you are already ready to buy. So how do you decide the mortgage loan type that will fit your need? Should you choose an FHA loan, a fixed rate loan, adjustable loan, or something else? How about the city of Houston down payment assistance programs?
There are a lot of loan options you can choose from which will fit your needs. In this article, we can help you decide. Are you looking for an adjustable rate loan that comes with short-term benefits of lower rates? Or do you want consistent payments and rates at a fixed rate loan?
Common Home Mortgage Options
Here’s our list of the most common types of loans which you might want to consider.
Adjustable Rate Loan
An adjustable rate loan typically has a lower fixed rate for usually 5 to 7 years which will then adjust annually. If you don’t have any plans of staying in your house longer than your initial term then it’s best to choose this loan type and take advantage of lower payments and interest rates.
Fixed Rate Loan
The fixed rate loan has a set interest rate which will remain equal for your loan’s full term. You might want to choose this if you don’t want any stress of adjusting monthly payments. A fixed rate loan has a stable monthly payment so you can easily plan for your long term goals.
Interest Only Loan
The interest only loan has an interest-only payment for a particular term. After that, the mortgage payment will go up to the interest amount and full principal. Consider this loan type if you don’t have any plans of staying for many years in your home especially if you have an inconsistent monthly income or if you know that your current income in the future will increase by the time you begin paying in full.
The FHA loan is guaranteed by the government and offers borrowers low requirements to qualify and low down payments. It’s best for first time home buyers who want to take advantage of the loan’s benefits.
Lastly, for veterans, there’s the VA loan that the U.S. Department of Veterans Affairs has backed up. This loan offers benefits like mortgage insurance and 100% financing. If you are a veteran’s spouse, currently serving the military or a veteran, you might want to consider this loan.
And that’s about it. Before you go and choose a loan, it’s important to ask yourself how long you want to stay in your house, are you planning to have kids, are you expecting changes in your current income and many more. In doing so, you’ll be guided in finding the right home loan type that will fit you and your family.
After you’ve found the loan type you want, it’s now time to find knowledgeable loan advisors who can answer your questions and explore which mortgage program is the right one for you.