Buying a house is one thing. Choosing the mortgage is another. When you’ve already decided to purchase a home, finding the best mortgage lenders can be a tough decision. Although the interest rate is a top priority, important factors such as the length of stay in the home and what type of loan must be taken into account as well.
Here are four tips to help you find the right loan for your home.
Bank Loan vs. Government-insured loan
There are two kinds of mortgages: bank loan which is offered by private entities and government loans. Usually, applications for a bank loan is difficult to qualify for because it is not backed by an external source such as the government. It also needs a higher amount of down payment which can differ according to one’s credibility to pay. On the other hand, a government loan is usually the best alternative if applications are rejected by the banks. It also offers a lower down payment and needs a lower credit score history. The downside is the higher interest rates.
Jumbo Loan vs. Conventional Loan
The type of property is a big factor in choosing between jumbo and conventional loans. The main difference lies in how much money the lender can provide. In the US, loans for properties that cost $417,000 and above are called jumbo. Conventional loans tend to be simple, straightforward and limited.
Fixed Rate vs. Variable Rate
Most people think the variable interest rate is much better than the fixed interest rate. Fixed interest rate means that your monthly installment is constant for a specific period of time. This is also a good option if your term is longer. Variable interest rate changes according to the stock market. Because of the better economic conditions, interests are lower compared to rates 10 years ago. It is essential that for you to choose the best mortgage rates, you must think of your capability to pay in the long run.
Short-term vs. Long-term
The main difference between long-term and short-term is the length of payment. A short-term loan can be as short as 12 months and could mean a higher monthly payment but a lower interest rate. As you can imagine, the long-term loan is the opposite. To know how to take advantage of these terms, there are important requirements such as the age, capacity to pay, loan amounts and loan costs. You may discuss these terms with your local mortgage lenders for you to be enlightened on all options.