Mortgage selection tips
4. Explore mortgage options
A variety of mortgages are available with varying down payment and eligibility
requirements. Here are the main categories:
Conventional mortgages are the most common type of home loan and
are not guaranteed by the government. Some conventional loans
targeted at first-time buyers require as little as 3% down.
FHA loans are insured by the Federal Housing Administration and allow
down payments as low as 3.5%.
USDA loans are guaranteed by the U.S. Department of Agriculture.
They are for suburban and rural home buyers and usually require no
down payment.
VA loans are guaranteed by the Department of Veterans Affairs. They
are for current military service members and veterans and usually
require no down payment.
You also have options when it comes to the mortgage term. Most home
buyers opt for a 30-year fixed-rate mortgage, which is paid off in 30 years and
has an interest rate that stays the same. A 15-year loan typically has a lower
interest rate than a 30-year mortgage, but the monthly payments are larger.
If you plan to stay in the home for only a few years, you might consider an
adjustable-rate mortgage, or ARM. ARMs often start with a lower fixed-interest
introductory rate, enabling you to buy a more expensive home for the same
monthly payment, but they can also increase (or decrease) over time.
5. Research first-time home buyer assistance programs
Many states and some cities and counties offer first-time home buyer
programs, which often combine low-interest-rate loans with down payment
assistance and closing cost assistance. If you meet low- to moderate-income
benchmarks, you could qualify for a grant or forgivable loan that doesn’t need
to be paid back.
Tax credits, known as mortgage credit certificates, are also available through
some first-time home buyer programs.
6. Compare mortgage rates and fees
Plan to shop around for mortgage lenders and compare three to five different
quotes. Doing so could save you thousands of dollars in interest over the
lifetime of the loan.
The Consumer Financial Protection Bureau recommends requesting loan
estimates for the same type of mortgage from multiple lenders to compare the
costs, including interest rates and possible origination fees.
Lenders may offer the opportunity to buy discount points, which are fees the
borrower pays upfront to lower the interest rate. Buying points can make
sense if you have the money and plan to stay in the home for a long time. Use
a discount points calculator to decide.
In a buyers market, some motivated sellers may offer to pay some or all of the
buyer’s points to close the deal.
If you need help finding a lender, let me know. I want to be able to help you
get that home!
Mary Cockburn
505-639-2090
MaryCockburn.Realtor@gmail.com
