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5 Questions That Can Help You Choose A Mortgage
Program
Purchasing
a home is a big commitment. With so many types of
home financing programs out there, choosing the wrong
one could make that commitment difficult to keep up
with. Before you commit yourself to a loan, which
is a binding contract, ask yourself these five questions:
1. How long do you plan to live in the home?
Determining the length of time you plan on residing
in a home can help you decide which type of loan is
best for you. Are you just looking for a starter home,
or are you in this for the long-haul? If you don't
see yourself living in the same home for more than
5 years, a 5/1 ARM may be your best bet. If you can
see yourself retiring in the house you're about to
purchase, you could be better off choosing a 20 or
30
year fixed rate loan.
2. Are you more concerned with low monthly payments,
or paying off the loan quickly?
When it comes to short-term loans (like 15 or 10 year
mortgages), your monthly payments will typically be
higher; however, as a trade off, you will be paying
more toward your principal. This leads to the loan
being paid off sooner than it would be if you were
in a 30 year mortgage.
3. Are you OK with the risk of a rising interest
rate?
A popular mortgage choice for some borrowers is the
3/1,
5/1
or 7/1
ARM, or Adjustable Rate Mortgage. These loans
generally offer a lower-than-average interest rate
for the beginning period, but that rate will change
once a year for the remainder of the loan. Keep in
mind that while the rate may not necessarily go up,
you must be financially prepared should an increase
occur.
4. How much of a down payment/equity in the home
do you have?
If you're strapped for cash and can't put much toward
a down payment, a low or no money down home loan could
be the right choice for you. The Federal Housing Administration
offers a variety of loans (FHAs) for qualified borrowers
who lack the necessary funds for a down payment. If
you've been able to save up a good chunk of change
to put down, or if you have established equity in
your current home, you'll have even more options available
to you.
5. Do you qualify for a specialty program such as
a VA
or USDA
loan?
Some borrowers may find that they have particular
qualifications that allow them to apply for special
loans with extra benefits. Military members, for instance,
may qualify for a no money down VA loan while those
looking to purchase in a rural area could get special
financing with low interest rates.
After you have asked yourself the following questions,
talk to your mortgage adviser and begin your journey
to homeownership.
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