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Choosing a Loan Type: How to Select the Mortgage That Best Meets Your Needs

12/09/2010

There are many different mortgage types to choose from, and no two mortgage types have the same benefits or terms.  If you’re looking for a home purchase mortgage or a refinance mortgage and you’ve done some research, you’ve probably seen many of these options compared.

But how do you evaluate them?  How do you select the loan type that best meets your needs?  Read below for some suggestions.

1.    Determine how much you need to borrow.  The first step toward determining which loan type is best for you is to determine the scope of your mortgage.  Take into account the funds you have on hand as well as the price of the home, as these points will significantly affect the terms of the loan.  If you need to borrow a large amount, your mortgage may fall under the parameters of a jumbo loan.

2.    Decide on the loan term length you need.  Do you hope to pay your mortgage off in 15 years?  In 30?  Find out what your home ownership goals are.  If you plan to own your home for many decades to come, a 30 or even 40 year mortgage may not be an issue.

3.    Check to see if you qualify for any mortgage programs.  If you’re a veteran, you likely qualify for a VA home loan.  If you’re a first time home buyer, you may qualify for an FHA home loan.  Check with your local lender to see what requirements are specified for these programs.

Determine each of these things, and you’ll be that much closer to knowing what mortgage type is best for you.

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