Most people who dream of buying their own house usually look to financing to help themselves own a home. But owning a home isn’t as simple as shopping around for a house, applying for a loan then paying off the mortgage. Even as banks and lending institutions are aggressively attracting customers by offering lower interest rates, you should still give this enough thought before making a final decision.
It is better to investigate around and ask about what types of credit are open in the market that may suit you. It is impossible to have a perfect loan that will work for everybody. There will always be one loan type that will work better for you than another. Decide first on what you want for a home in order to have the best type of loan you should choose.
Are you a low-income house hunter?
If you want to purchase a house but you don’t qualify for a loan because you currently have low income, then a temporary buydown may be the right loan for you. A temporary buydown is ideal for people who are cash-strapped for the moment but expect to enjoy an increase in income in the near future.
The two most popular kind of temporary buydowns are 3-2-1 loan and the two-to-one loan. The first type have an interest that goes up one point every year for the next three years and then remain constant for the succeeding years. The second one increases the interest rate have a one point increase for only the first two years.
Temporary buydowns may require to you shell out a little more money than other loans at the beginning, but this small sacrifice will be enough to qualify you for the loan.
For those looking for temporary housing
You want to own a home but aren’t entirely sure how long you’ll be staying in a given area. Either your job requires you to be assigned to different cities, or you plan to later on sell your home. If this describes your current situation, then you are better off getting delayed adjustable rate mortgage (delayed ARM).
Delayed ARM requires you to pay fixed monthly fees longer than other type of buydowns. For instance you have a 5-1 delayed ARM, meaning, the interest rates will be constant for the first five years only. Change of interest rates will depend on economic conditions and you arrangement with the lender.
Are you looking for a home to spend the rest of your life in?
If you have no plans of moving or plan on staying in your home for the remainder of your life, you can go for a fixed-rate mortgage. Fixed-rate mortgages mean just that – fixed. Your interest rates and monthly payments remain the same throughout the life of the loan. If you can get a low interest, so much better because your payments don’t increase even if market rates do.
You can either get a 30 year or 15 year fixed-rate mortgage. A 30 year mortgage will afford you lower monthly payments than a 15 year-fixed, but you end up paying for more, overall, on the former.