Mortgage loans come in many forms, from fixed rate to adjustable rate mortgages (ARMs) that offer greater flexibility and lower rates. The ideal loan for you depends on your personal situation and finances; we’ve put together some essential tips to make it easier to decide what’s best for you.
Getting Pre Approved for a Mortgage
A mortgage preapproval is an official letter from your lender indicating they are willing to approve you for a certain amount with specific interest rate and conditions. This gives you peace of mind that there’s a good chance of approval, as well as signaling to sellers that you are serious about purchasing the property.
Before you begin shopping for a home, it’s wise to get preapproved with a lender. Doing so can help avoid any delays or surprises during the mortgage process. Additionally, make sure all necessary documentation is submitted prior to making an official application for your loan.
Selecting Your Type of Mortgage
Mortgage loans come in many forms, but most are tailored towards first-time homebuyers or those with low to moderate incomes. Most come with fixed interest rates so borrowers can have peace of mind knowing exactly how much they’ll be paying each month.
However, some mortgage loans may be better suited for more experienced homeowners. Adjustable-rate mortgages (ARMs) allow borrowers to lock in their interest rate for a set period, which can be beneficial if you anticipate an increase in income or think your rates will come down eventually.
The interest rate you pay on your mortgage is one of the most influential factors when deciding how much you can afford to spend on a home. The lower your rate, the greater savings you will experience from reduced monthly payments.
Arm-length mortgages (ARMs) usually offer lower rates than fixed-rate mortgages during the initial years of home ownership. However, they may not be the best long-term choice if you plan to move within several years or make a major purchase such as an expensive car or new furniture.
Many homebuyers opt for a fixed-rate mortgage as it offers them security at low interest rates and preserves their buying power over the long haul. As such, these are among the most prevalent types of mortgages in the U.S.
Another option is a government-backed mortgage, known as a VA mortgage. These loans are available to veterans, active military members and their spouses regardless of credit history.
Some VA loans even provide flexible repayment options, such as a reduced payment schedule or the option to refinance your mortgage once you have accrued enough equity.