If you’re financing a new home with a mortgage, you are surely wondering what the best option is. This depends on your situation, as well as your goals in the future. It is also advisable to determine how much house you can comfortably afford, while also taking into account your monthly earnings, debts, and money for down payment.
Your Budget and Down Payment
If you’re buying a house but has little money for down payment, a Federal Housing Administration (FHA) loan is worth considering. This lets you get a mortgage with a down payment of only 3.5%. City Creek Mortgage and other mortgage companies in South Jordan note that you can also talk to other lenders, as many now offer mortgages for those who can’t afford a large down payment or at least 20% home’s value.
Paying Private Mortgage Insurance (PMI)
Private mortgage insurance (PMI) is required if you take out a loan with little to no down payment. This insurance protects the lender in case you default on the loan. Once you’ve paid enough towards the loan’s principal amount, which is 20%, you can ask the lender to remove PMI. Many borrowers see PMI as a burden, so they save first before buying.
Plans in Keeping the Home
The right loan will also depend on how long you plan to stay in the home. A fixed-rate mortgage is ideal if you intend to keep the home for many years. Just be sure not lock in a 30-year fixed loan if you plan to move after a few years. Many also consider a hybrid adjustable-rate mortgage (ARM), as it can match the time they plan to keep the house. This can be available in a 5/1 form, a loan with a fixed rate for five years and rates that change annually.
The best mortgage type will depend on a lot of factors. It is never advisable to choose a loan with the lowest rates, without considering your preferences and goals for the future. It is best to talk to a reliable lender to learn more about all available mortgage options.