Finding the Right Loan
For most people, buying a home is impossible without getting a mortgage. And because it is a major financial commitment, you should find the mortgage that best suits your needs.
Of course, the loan that’s “best” for you will vary with each individual situation. If, for example, you anticipate living in your home for many years, a low fixed rate may be the most important factor in choosing a loan program. However, if you expect to keep the house for only a short period of time, a loan with the lowest closing costs may be your main concern.
Some things to consider;
How long do you plan on keeping the mortgage open?
Note that this is different than asking how long you plan on keeping the home. To some, paying the mortgage off as soon as possible while retaining the home long term is a priority. Therefore, a loan without a prepayment penalty is important. Determining the length of time you plan on keeping your loan open will help guide you toward the right loan.
What is your risk tolerance?
If your answer here is “low”, chances are a fixed rate loan is a good place to start. If interest rate risk is not a concern, an adjustable or hybrid loan might suit your needs the best.
Will your household income increase, decrease or stay steady in the future?
Maybe you just completed a residency and your income will increase substantially in the years to come. Or you are about to retire and your income will drop to a lower but predictable level. Spouse returning to work, or maybe leaving the workforce to raise a family.
Your income – or ability to make your monthly mortgage payment now and in the future – is a question worth reviewing in great detail with your lender.
Should I wait until I save 20% down in order to avoid Private Mortgage Insurance (PMI)?
The answer to this question depends on several factors. Consider how long it might take for you to save 20% of the sales price. Would you miss out on a today’s home prices or low interest rates while waiting to save 20%? Even if you had 20% to put down, would you be better off retaining as much of your savings as possible for a rainy day, or possibly to pay off consumer debt or to make improvements to your new home? Reviewing the pros and cons of a large down payment and its real affect on your monthly payment is well worth talking about with your lender. And with a variety of low down payment “No PMI” loan options available today, waiting for a 20% down payment might just be a thing of the past.
Still confused about which loan is right for you? That’s ok – Your American United Lending Professional is here to help. After an initial review of your qualifications, together we will explore all of the loan options available to you. That way you can make an informed decision.