When purchasing a house, choosing the home that's right for you isn't the only important decision you'll make. You'll also need to decide on the type of home loan that best suits your needs. These days, there are a number of mortgage options available to buyers, ranging from conventional home loans to FHA loans, VA loans, and everything in between. To help you decide on the mortgage that's right for you, be sure to take some key factors into consideration and speak with a trusted mortgage broker.
1. Your Down Payment
How much of a down payment can you comfortably afford to put on your new home? This will be a major influencing factor when it comes to the home loan type that's right for you. A conventional 15 or 30-year mortgage will require at least a 20% down payment, which is pretty substantial and not often realistic (especially for first-time buyers). If you don't have a lot saved up for a down payment, you may want to explore an FHA loan as an option, since these only require a minimum 3.5% down payment.
2. Your Credit Score
It's also a good idea to know your credit score before you decide on a home loan type. After all, your credit rating can play a major role in your ability to get approved. If you have less than ideal credit, you may want to explore mortgage options with more lenient credit requirements. Keep in mind, however, that you will likely pay more in interest when you're approved for a loan with poor credit.
3. Repayment Term
How long are you comfortable with repaying your loan? 30 years is pretty standard for most mortgages, though 15-year options are available for those who want to pay off their loans sooner and can afford a larger monthly payment. Keep in mind that you'll also save on interest significantly when you have a shorter repayment term.
4. Interest Rates
Speaking of interest, you'll also want to consider the market and current rates. If rates are decent, consider locking them in with a fixed-rate mortgage. If you're willing to take a little risk in the hopes of rates dropping down the road, an adjustable-rate mortgage (ARM) may be worth exploring instead.
These are just a few of the most important considerations for choosing your next home loan, so be sure to keep these in mind as you explore your options! To learn more, contact a company like Home Mortgage of America.