Some of our job is a lot of paperwork. But the fun part is getting the right loan for the right family. Here is a little help to getting to know the different options in home loans.
Look at the options to find right home loan for you.
To find the right home loan, it's all about saving money. Take your time finding the right house – take the same care with the getting a loan as well? When acquiring the right home loan, there are several elements to consider. What is your financial situation? How much of a down payment do you have? What are current interest rates? How long do you plan to stay in the new home? Consider these elements of your life, plus others, to help you find the right home loan for you.
How long will you be at this address?
First, how long you plan to stay in the home. Predicting the future is difficult, you can probably make a good guess as to how long you’ll stay. These few questions may help. Is your family going to expand or get smaller in the foreseeable future? Does your job require a transfer in the next few years or not? Are you part nomad or like to put down roots? Then this will affect what home loan is chosen.
You are moving in a few years
If you see a move coming within 4 to 5 years, consider several different options for the right home loan. The rates are low, you may consider a short-term fixed rate mortgage (such as a 10 or 15-year fixed loan) to build up equity for the short time in the home. Another option to consider is an adjustable rate mortgage (ARM) or a hybrid loan. An ARM gives a lower interest rate than typically offered with a fixed rate mortgage. The catch is that the ARM’s interest rate changes. A hybrid loan gives the benefit of an ARM’s lower interest rate, but the security of a fixed loan because there is a fixed period before the rate resets. If the plan is to move relatively soon, it may turn out that you sell the house before rate adjusts.
Putting down some roots
You’re not moving again anytime in the near future, and then a fixed rate mortgage may be the right loan for you, especially when interest rates are low. A 15-year or 30-year fixed rate mortgage can be the perfect fit. This give you the long term housing with the security of knowing what your interest rate (and monthly payments) will be. You can lock in a good interest rate that is guaranteed to you for the 15 or 30-year term of the mortgage.
What kind of down payment options are there?
Finding the right home loan also means evaluating options for the down payment. The 20 percent down payment is not necessarily the standard these days.
• No-down-payment mortgage
Yes, you read that right. It is possible to get a mortgage without putting any money down. That means that you finance 100 percent of the purchase price of the home. Sounds pretty scary, right? But, sometimes it can be a viable option. If you live in a market with unsteady pricing, it may not be that possible for you to save 10 to 20 percent of the purchase price before being priced out of the market. With a no-down-payment mortgage, you’ll get a higher interest rate and you’ll have to pay PMI (private mortgage insurance). Also, it’ll take longer to build up equity since you didn’t put any money down. Keep in mind that not having equity in your home can be dangerous if home prices fall.
• Piggy-back loan
Another way to finance a home if you don’t have enough for a 20 percent down payment is a piggy-back loan. Basically, A piggy-back loan is a combination of two loans that close at the same time to allow you to purchase a home. The most common types of piggy-back loans are an 80/20 mortgage, an 80/15/5, or an 80/10/10. An 80/20 means that you finance 80 percent of the home’s purchase price through a first mortgage, but the other 20 percent comes from a second mortgage. An 80/10/10 means that you finance 80 percent of the purchase price via a first mortgage, 10 percent from a second mortgage, and that you make a down payment of 10%. With a piggyback loan you avoid PMI, but your second loan often will have a higher interest rate. Still, this can be a good option if you don’t have enough for a 20 percent down payment.
• FHA loan
For the first-time homebuyer, the government runs a program to help you realize the dream of homeownership. An FHA loan lets you get in with as little as 3 percent down. This really just scratches the surface for your options in finding the right home loan. Know your financial situation and investigate all of the mortgage options so that you can get the right home loan for you.
We hope you find this helpful in your home buying search. If you have any further questions don’t hesitate to call, email, or leave a comment.
Yours Truly,
Home Zone Mortgage & loan
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