Many factors come into play when determining the right mortgage for you. Your credit score is one of them, as this can affect the interest rate you qualify for, as well as your monthly loan payments. The same is also true for your down payment, as making a larger initial payment can result in lower rates and monthly payments.
If you’re a first-time homebuyer, it is best to do your homework and find out how your overall financial situation measures up to the eligibility requirements. You can also talk to a reliable lender who can recommend the type of mortgage that best suits your situation.
It is also a good idea to look into your needs and goals when choosing a home loan. Gleaning from mortgage lenders in Utah like Altius Mortgage, here are some things to think about when picking a mortgage:
Security and Stability
A fixed-rate mortgage is right for you if you want your mortgage payments to remain the same through the entire life of the loan. This means that there are no adjustments or surprises that cause your monthly loan payments to change. If the rates, however, decreases dramatically, you might have to refinance to take advantage of them. However, doing so costs money.
The 30-year fixed mortgage is a popular option for many first-time homebuyers, as it comes with lower monthly payments, especially when compared to its counterpart, the 15-year fixed-rate loan. This is because the payment term stretches to a period of 30 years. This type of loan, however, might suit you if you intend to live in your home for the long-term, like 10 years or more.
Building Equity Faster
A fixed-rate loan with a mortgage term of 15 years (or shorter) will allow you to build equity faster than with a 30-year mortgage. You should know, however, that this comes with high monthly payments that can limit the overall price of your house. However, then again, it enables to pay your home quickly, while having the security and stability that your payment will be the same every month.
This mortgage is right for you if you’re looking to retire sooner without the burden of monthly loan payments. You can also choose to finance to a shorter term if you originally chose a 30-year mortgage but want to pay it sooner. Just be sure to do your homework and know the pros and cons of refinancing your loan.
Short-term Ownership and Selling Your Home in the Future
An adjustable-rate mortgage (ARM) makes sense if you don’t plan to live in the home for the long-term or if you plan to sell it in less than 10 years. You can also go with this loan if you intend to refinance in a few years to qualify for a better rate or switch to a fixed-rate loan. Unlike fixed mortgages, an ARM comes with prices that can adjust according to the market trends.
They have a lower initial rate than 30-year loans, but they can change after a specified time and frequency. These mortgages are identified by two numbers, with the first one indicating the initial rate period and the second one showing the adjustment frequency. A 5/1 ARM, for instance, means the same initial rate for five years and then followed by rates that adjust every year.
In the end, you can learn more about your loan options by working with a lender. It is also a good idea to do some research to make an informed decision.
