Mortgage Loans-Which choice is right for you?

Interest Rates (Photo credit: 401(K) 2013)

Before you take that first step to begin your search for a new home or your first home, it’s important to get pre-qualified for a loan.  I know your thinking that’s easy enough to do, right?  Easy until you see all the loan programs out there. What are ARMs, balloons, and jumbos?  All these terms can be so confusing, and it can make it difficult for you to decide between all the choices.  So your thinking which is right for you?

Here is a brief explanation on some of the loans, however it is best to check with a loan officer that is a professional at this.  At any time feel free to check our mortgage calculator.

  1. 30-year Fixed Rate Mortgage:

These are the safest and easiest route to go, your monthly payments are relatively affordable (since payment is extended for 30 years), and you also know the payment for the length of loan. 30-year fixed rate loans give you, the homeowner, peace of mind, because you know what your payment will be, though property taxes and homeowner insurance may fluctuate. These are best if you’re planning to stay in your home for a long period of time.  The only con is that when rates go down,  you’ll need to refinance to take advantage of the lower rates.

 2.15-Year Fixed:

Definitely best if you can afford a larger monthly payment. This is also a great choice if you buy a less expensive home than you qualify for.  You’ll be able to pay off your loan in half the time and save huge bucks on interest. In addition, the interest rate is lower on a 15-year fixed than the typical 30 year fixed.  With the low cost of homes, this may be an even more appealing option.

 3. FHA Loans:

An FHA loan is the easiest type of real estate mortgage loan to qualify for because it requires a low down payment and you can have less-than-perfect credit. Also, because FHA insures your mortgage, lenders are more willing to provide loans. Another advantage of an FHA loan is it’s assumable, which means if you want to sell your home, the buyer can “assume” the loan you have. FHA loans can be used for a home purchase or a refinance.

 4. USDA Loans:

A USDA loan (also called a Rural Development Loan) is a government insured home loan that allows you purchase a home with NO Money Down. USDA Loans offer 100% financing to qualified buyers, and allow for all closing costs to be either paid for by the seller or financed into the loan. USDA offers some the lowest rates of any loan, and you will always have a fixed interest rate.

5. Balloon Loans:

If you choose a balloon loan, you’ll generally have a lower interest rate over a period of time and then have a set time when your loan balance comes due.  Balloon loans are frequently combined with other types of loan programs.

There are many so loan products out there it’s easy to start feeling overwhelmed.  You, as the home-buyer, need to carefully consider your options. Don’t forget that how long you intend to stay in your home will be a huge determining factor.

Regardless of which loan type you choose, the good news is that interest rates are still incredibly low, so talk to your lender today and start looking for your dream home!

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