Mortgages are probably the least fun subject when it comes to buying a new home. However, having a good handle on what is going on with mortgages is the easiest way to save money for any homeowner. The crazy low interest rates of the past few years are gone. While current rates are still historically low, the are things you can do to make them even more affordable.
First things first – while you should educate yourself about mortgages, always consult a licensed lender and real estate professional before deciding what to do.
Mortgages for homes are broken out into two major sources – private lenders and the U.S. government. The rates and terms vary widely between the two. For example, if you are a veteran, you can get a loan through the VA. The down payment required is greatly reduced, but the obligations required of the home seller make the this funding source more challenging in getting a deal done. Private lenders are usually broken down into banks or mortgage brokers. Banks have their products while mortgage brokers can find mortgages from multiple sources. There are advantages and disadvantages to both.
Mortgages themselves usually come one of two ways – fixed-rate or adjustable-rate. With a fixed- rate mortgage you get a set rate for the life of the mortgage. These mortgage types usually have two term choices of 15 or 30 years. The 15-year typically has a better rate but higher payments. However, if saving money overall is the goal a 15-year can be the best choice. An adjustable-rate mortgage has a rate that will change, either up or down across the life of the loan. The term here can be as short as 3 years, but the rate starts out better than a fixed-rate mortgage. There are caps and limits to how high the rate can go which offers some protection against the unexpected. Adjustable-rate mortgages can make the most sense if your new home is not your forever home.
The world of home mortgages is complicated. There lots of factors that effect what type of mortgage, at what rate and with how large a down payment. There is no way to get it all straight without asking a lot a questions of someone who knows you and what is possible in the marketplace. Drop by AddressUtah.com to get help with some straight answers.