Many Americans are trying to purchase a home in a very volatile market, so there are options when choosing a mortgage.
Whether you’re a first time homebuyer, or low income, there are options to fit your specific needs.
Some people can also benefit from government programs.
Fixed Rate mortgage explained
A fixed rate mortgage will give you the same payment every month through the entire mortgage.
The interest applied to the loan is fixed and cannot be changed.
While you may be making higher payments today, the value of money changes and these payments could be considered lower in twenty years.
The rate of a mortgage’s interest will also rise in the future to offset this cost for banks, while yours stays the same.
Conventional mortgage explained
A conventional mortgage is most commonly a 30 year fixed rate mortgage.
Just because they have a fixed rate doesn’t make it conventional.
People with high credit and low debt to income can get special mortgages others can’t.
They can be had through Fannie Mae and Freddie Mac.
A lower amount of cash is needed in the beginning and people can put as little as 3% down on a home.
Interest can be higher but borrowing costs are less.
Adjustable rate mortgage explained
This type of loan is directly tied to the national interest rate.
If the national interest rate rises, so does the cost of your payment.
A lot of times the payments will be a fixed rate for the beginning then switch to adjustable around the 7th year.
Rates can change every six months when the fixed rate ends and adjustable rate begins.
There are government programs that offer help to first time home buyers, veterans, and even low income families.
There are programs through the FHA, USDA, and VA.
FHA loans require you to have a credit score of at least 580 and to put 3.5% of the payment down.
The USDA has similar loans for rural areas and low income families.
The VA offers loans to vets for their service in the military.
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