Which Mortgage Is Best for You
Which Mortgage is Best for You?
There are so many mortgage options out there -- and so many different numbers, conditions, and fine print -- that it can make your head spin!
So, how do you figure out which mortgage is best for you?
Simple! Just ask yourself these 5 questions:
1. Do I like to stay put?
If the thought of buying a house for the long haul and setting down roots appeals to you, a fixed rate mortgage may be the best option. That way, you won't have to deal with any surprises along the way!
Adjustable rate mortgages, on the other hand, are great for people who don't plan on spending decades and decades living in their homes. That's because they come with lower payments for the initial term -- then change. The exact length of your initial term will depend on your loan, but you may be able to take advantage of those low rates for five or even 10 years. Then, by the time the rates change, you'll be gone!
2. Am I a risk-taker?
If you like to roll the dice, you may like the thrill of an adjustable rate mortgage. Just be warned -- your monthly payments can go up considerably after your initial term is over. In essence, you're betting that mortgage rates aren't going to go up much over the next several years. It's a big risk, but one that can pay off if you're lucky.
When you have a fixed rate mortgage, though, the payments never change. You can sit down right now and know what your payments are going to be 15, 20, or 30 years from now. Sure, if mortgage rates go down, you won't get to benefit (unless, of course, you're willing to go through the expense of refinancing). However, you'll never have to worry about your rates going up, either.
3. Do I have enough income to cover higher payments?
If your budget has room for a few extra hundred dollars per month, you can opt for a shorter loan -- and, thus, save thousands of dollars in interest.
However, the last thing you want to do is stretch your budget too thin. If you can't swing the extra payments, that's OK. You can make them more manageable by opting for a 30-year mortgage. Just remember that you'll be paying those payments for twice as long!
4. Do I have good credit?
The higher your credit is, the more perks you'll be able to take advantage of. If your credit score is less than 620, don't expect many lenders to talk to you.
However, that doesn't mean you're out of options. FHA loans were designed to help people realize their dreams of home ownership -- even if their credit isn't exactly stellar. With an FHA mortgage, the federal government insures your loan. That way, private lenders don't have to take on your extra risk all by themselves.
That doesn't mean just anyone can qualify for an FHA loan, though. If your credit score is less than 580, you're probably out of luck!
5. Am I a first-time buyer?
If so, you may have less money to put down. After all, you're not going to be making a profit off of another home sale! As a result, you'll either need to spend more time saving up -- or, be willing to go along with extra rules and fees that come with smaller down payments.
There are so many mortgage options out there -- and so many different numbers, conditions, and fine print -- that it can make your head spin!
So, how do you figure out which mortgage is best for you?
Simple! Just ask yourself these 5 questions:
1. Do I like to stay put?
If the thought of buying a house for the long haul and setting down roots appeals to you, a fixed rate mortgage may be the best option. That way, you won't have to deal with any surprises along the way!
Adjustable rate mortgages, on the other hand, are great for people who don't plan on spending decades and decades living in their homes. That's because they come with lower payments for the initial term -- then change. The exact length of your initial term will depend on your loan, but you may be able to take advantage of those low rates for five or even 10 years. Then, by the time the rates change, you'll be gone!
2. Am I a risk-taker?
If you like to roll the dice, you may like the thrill of an adjustable rate mortgage. Just be warned -- your monthly payments can go up considerably after your initial term is over. In essence, you're betting that mortgage rates aren't going to go up much over the next several years. It's a big risk, but one that can pay off if you're lucky.
When you have a fixed rate mortgage, though, the payments never change. You can sit down right now and know what your payments are going to be 15, 20, or 30 years from now. Sure, if mortgage rates go down, you won't get to benefit (unless, of course, you're willing to go through the expense of refinancing). However, you'll never have to worry about your rates going up, either.
3. Do I have enough income to cover higher payments?
If your budget has room for a few extra hundred dollars per month, you can opt for a shorter loan -- and, thus, save thousands of dollars in interest.
However, the last thing you want to do is stretch your budget too thin. If you can't swing the extra payments, that's OK. You can make them more manageable by opting for a 30-year mortgage. Just remember that you'll be paying those payments for twice as long!
4. Do I have good credit?
The higher your credit is, the more perks you'll be able to take advantage of. If your credit score is less than 620, don't expect many lenders to talk to you.
However, that doesn't mean you're out of options. FHA loans were designed to help people realize their dreams of home ownership -- even if their credit isn't exactly stellar. With an FHA mortgage, the federal government insures your loan. That way, private lenders don't have to take on your extra risk all by themselves.
That doesn't mean just anyone can qualify for an FHA loan, though. If your credit score is less than 580, you're probably out of luck!
5. Am I a first-time buyer?
If so, you may have less money to put down. After all, you're not going to be making a profit off of another home sale! As a result, you'll either need to spend more time saving up -- or, be willing to go along with extra rules and fees that come with smaller down payments.
Source...