Home buying can be a whirlwind and, unless you are a lottery winner or heir to a fortune, likely includes taking out a mortgage.
Choosing the right mortgage loan for your budget includes assessing your income, lifestyle, credit history and qualifications. But it’s not just a matter of finding an affordable option – it’s also finding the best fit.
Here is a list of common borrowing options so you can be an educated homebuyer.
1. Fixed-Rate Mortgage
With a fixed-rate mortgage, your interest rate stays the same through the life of the loan. Whether you pick a 10-, 15-, 30- or even 50-year option, the interest rate remains static throughout the entire term. This is a very common option because homeowners can predict the payments without worrying about different charges or inflation. It makes it easy to budget for the long-term — your home payment stays the same year after year.
2. Adjustable-Rate Mortgage
With ARMs or variable-rate mortgages, monthly payments are adjusted at specified intervals based on the interest rate as well as market trends. This option usually offers a lower initial rate of interest and is easier to qualify for. Rates can fluctuate drastically, and can result in rising payments over the life of the loan, which is why this type of loan is considered riskier. Most ARMs have an interest ceiling so you know the maximum payment you could possibly have to make. When deciding on this option, it’s important to make sure you can afford the mortgage payment even if it hits that ceiling.
3. Federal Housing Administration Loan
FHA loans are insured by the government and allow buyers who may not be able to qualify for a home loan to obtain one with a low down payment. First-time homebuyers often find the FHA loans ideal because the requirements are easier to meet.
4. VA Loan
This government loan is available to veterans and spouses of deceased veterans that served in the U.S. Armed Services. The requirements vary depending on years of service and type of discharge. The main benefit is that the borrower does not need a down payment, but the size of the loan may be limited.
5. Interest-Only Mortgage
With interest-only loans, monthly payments are applied only toward the interest for a set period of time. The rate can be fixed or adjustable and the borrower’s payments change drastically after the interest-only period (usually 5 to 10 years) ends and payments grow to include both principal and interest rates. This option keeps expenses lower at the beginning of home ownership and leaves the chance to refinance later on. Before you even begin shopping for a home, it’s important to know where your credit stands, as better credit will get you more affordable rates.
Home – Where your story begins…
To learn more about how Coldwell Banker Grass Roots Realty can help you buy or sell a home, please call one please call one of our four offices in:
Grass Valley Office at 530-273-7293
855 Sutton Way, Grass Valley, CA 95945
Nevada City at 530-265-3282
108 Union Street, Nevada City, CA 95959
Penn Valley at 530-432-1131
11364 Pleasant Valley Rd, Penn Valley, CA 95946
South County/LOP at 530-268-1575
10193 Combie Rd, Auburn, CA 95602