Securing your finances for a home is the first part of home ownership and can take some research and dedication. You have to ensure that you’re also doing your part by maintaining a positive credit score, managing your mortgage points, and securing a mortgage lender. The type of mortgage that you chose will determine the actual down payment of your new home. The following guide is the top mortgage options explained in brief detail.
A Few Mortgage Options Explained
- Adjustable Interest Rates
When you buy a home, you decide how your interest rates are treated. With an adjustable interest rate, you get a 5 year locked interest rate and it adjusts annually over the next 25 years. An adjustable rate is called a “5/1” adjustable rate mortgage. You only get a lower interest rate and monthly mortgage for the first few years.
- Fixed Rate Mortgage
A fixed mortgage rate stays the same the length of your loan agreement. You will have the same size mortgage rate and interest the time it takes for you to pay off your loan. However, according the Federal Housing Administration (FHA), a fixed rate mortgage may be higher at first and may not be the best option for low to moderate income first time home buyers.
- 15- Year Mortgage
A 15-year mortgage allows you to pay off your loan fast and cost far less than longer term loans. You have lower interest rates with a 15 year mortgage. However, it does come with a higher monthly mortgage than a 30-year fixed rate. Unfortunately, this may take you off of your budget if you want to save on your monthly costs.
- 30-Year Mortgage
A 30 year mortgage is set for 30 years and comes with a higher interest rate than a 15-year mortgage. However, your monthly rates are lower which may be a great option for someone that’s on a budget. However, keep in mind the interest is spread out over the duration of the loan and may not be as bad as it sounds if you set a financial course.
You should thoroughly weigh your options before you choose a mortgage rate. There are many online resources that will help you get a narrative of your mortgage options in detail. However, a mortgage broker or real estate agent can professionally help you assess your options before you sign on the dotted line and become obligated to a contractual mortgage agreement.