Choosing the Best Mortgage From the Plethora of Options You Get

We can’t deny the fact that buying a home is probably the biggest purchase that someone can make in his lifetime as the amount involved is huge. Being able to choose the best mortgage loan which caters to your needs is among the most vital decisions in the process of homebuying. With the plethora of options that are available these days, it is tough to settle down on the one that suits your financial needs.

How much house can I afford? This should be the first question that you ask yourself before you take out a home loan. When it comes to home loans – view flexible home loan options, so that you can weigh their pros and cons. Read on to know more on this.

Type of mortgage: Conventional or Government-backed?

Mainly there are 2 types of mortgages, a traditional loan that is backed by a lender and a government-backed loan. Most of the federally backed loans come in 3 forms:

• FHA Loans, which are insured by the FHA (Federal Housing Administration) and which were designed to make home buying reasonable for the novices. They allow down payments of as low as 3.5%.
• VA Loans are usually insured by the VA (Veteran Affairs) department and they offer the buyers little or no down payment option. This facility is given to those who have served the military service or are now serving.
• USDA Loans are backed by USDA (US Department of Agriculture) and these loans cater towards the buyers of rural property who are able to meet income requirements.

On the other hand conventional loans are backed by private lenders, banks or even by credit unions. The borrowers will require a stellar credit score to qualify for such loans. These lenders won’t lend you with an affordable rate if they find you to be a risky borrower who can’t manage his finances well.

Interest Rate: Adjustable or Fixed?

Once you decide on the loan, next you would have to decide whether you want the interest rate of the loan to be fixed or adjustable. As the name suggests, the interest rate that you have to pay on a fixed rate mortgage will never change. In case you seem to be settled down with your career and you get a handsome salary, choosing a 15 year term mortgage with a fixed rate of interest will be your best bet. You will always be aware of your monthly payments.

On the contrary, adjustable-rate mortgages reset their interest rates in specific intervals. Initially, you have to pay lower rates than your fixed rate mortgages but after the completion of the teaser period, the interest rates keep rising. If you’re someone who is planning to stay in your house for just few years, this can be a good option for you.

So, whenever you’re out in the market to get a mortgage loan, make sure you choose the one that best fits your financial affordability and your current financial situation