If you’re in the market for a new home, financing options are likely top of mind. But which should you choose? Let’s look at our most popular loan programs to see which may be right for you.
About 90% of home buyers choose a 30-year fixed-rate mortgage. Compared to other options, it usually has lower monthly payments and a longer repayment period.
Mortgage interest is usually tax-deductible. As most of a monthly mortgage payment goes toward interest in the first years, that deduction could be sizable with this loan. Then there’s predictability. While insurance and taxes can change, the fixed interest rate you lock in will not.
These factors are especially attractive to first-time buyers who plan on staying in their new home for the long haul.
Some borrowers choose a 30-year adjustable-rate mortgage (ARM). Here, the interest rate can go up or down with wider interest-rate trends. ARMs often have lower initial interest rates compared to fixed-rate mortgages.
When home buyers choose a 15-year fixed mortgage over a 30-year one, it’s usually to save money on interest. As you’re paying off the loan in half the time, you may pay about half as much in overall interest. That could be a saving of tens of thousands of dollars. Also, borrowers can often get lower interest rates on 15-year loans compared to 30-year loans. And fees can be lower.
Of course, there’s a big consideration: significantly higher monthly payments. Home buyers might have to look for a home with a more modest price tag if they’re planning to pay it off in 15 years.
Borrowers can also choose a 15-year ARM. With potentially lower initial monthly payments, ARMs are often easier to qualify for. Can you go from an ARM to a fixed rate? Yes, with refinancing, you can change from an adjustable-rate to a fixed-rate mortgage.
There’s a misconception that FHA loans are only for first-time home buyers who don’t meet the requirements for conventional loans. Not true. However, first-timers gravitate toward FHA loans because of the lower qualification requirements. And lower down payments; some eligible borrowers may make 3.5% down payments, while others could qualify to put 10% down.
Insurance costs are usually higher with FHA loans, which require mortgage insurance over the life of the loan if the borrower puts down less than 10%. For 11 years with more than 10% down. Conventional mortgages usually require insurance only until there’s 20% equity in the home.
Other Loans to Consider
If you’re a veteran, military spouse, or active-duty service member, you may benefit from a VA loan. Home buyers looking to finance higher-end properties often look to Jumbo loans. And if you’re a teacher or a civil servant, you may be eligible for a discount on closing costs.
However you choose to finance your new home, the Decker Group is here with the right mortgage program. And loan experts to help guide you through the process. Contact us online or call us at (972) 591-3097.