Identifying Your Home Loan Needs1/13/2011 There are many different mortgage types available in the marketplace, and it can be difficult to determine which one will best meet your home purchase needs. The best way to solve this issue is to set clear financial goals and understand the different loan types available. Ask yourself the following questions. Do you plan to pay the mortgage off and own the home outright? If this is your plan, you should pursue a stable, short-term mortgage, such as a 15 year fixed rate mortgage, in order to achieve full equity ownership as soon as possible. A 30 year fixed rate mortgage is also acceptable, since you plan to remain in the home long term anyway. Don’t take out an adjustable rate mortgage (ARM) if this is your plan. An adjustable rate mortgage is beneficial only if you plan to refinance as soon as possible. Do you plan to use your home as a source of equity to fund other investments? If this is the case, you’re probably planning to refinance in the future. Select the loan type that will allow you to pay as much into the equity of the home as early as possible. Don’t focus as much on getting the lowest mortgage rates in this case. Instead, find the loan plan that will allows you to build up as much equity as possible. Do you plan to live in the home or use it as an investment property? If you’re planning to live in the home, you’ll have an easier time getting the mortgage funding you need than if you’re planning to use the home as a rental or other investment property. If the home will be your primary residence for at least three years, you’ll be able to take out an FHA mortgage, which offers many benefits. The best way to determine what mortgage type will best meet your needs is to contact a qualified mortgage professional who can advise you. |
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