If you’ve saved up your down payment and you’re looking into buying a home for the first time, then it’s likely you’re wondering what type of mortgage is best. However, there’s no short answer to this question; each type of mortgage is different. However, you can choose the best type of mortgage based on an understanding of your circumstances and goals.
What Type of Mortgage is Best?
Best in General: Conventional Fixed Rate Mortgage
The conventional fixed-rate mortgage is conventional for a reason; it’s the right choice for many homebuyers. As opposed to a variable rate mortgage, where the interest rate can change year by year, a fixed-rate mortgage locks in your interest rate for several years. The first few years of homeownership are the most precarious, and a fixed-rate mortgage means that the bank will shield you from unfavorable interest rate changes. For new homeowners, this security and reliability is usually worth much more than the potential gains that could come with favorable interest rates.
Good for Financially Secure Homeowners: Variable Rate Mortgage
Variable-rate mortgages are often slightly better deals as opposed to fixed-rate mortgages. If you’ll have a substantial amount of cash left over after making your initial downpayment and a secure income, then it’s worth looking into a variable rate mortgage. In your situation, the security of a fixed-rate loan isn’t so valuable and you should consider if a variable rate mortgage is right for you.
Lowest Downpayment: Government-Insured Mortgages
Many working Americans are secure in their jobs and wish to become homeowners. Furthermore, these people are often demonstrably capable of making mortgage payments, as they’re already paying for rent which is more expensive. However, one problem stands between them and homeownership, and that’s saving for a down payment. In this case, you should look toward government-insured mortgages that accept extremely low down payments or wave the requirement entirely.
The Federal Housing Association helps poorer Americans become homeowners. While there are several benefits behind an FHA mortgage, the most important one is that you can become a homeowner with a downpayment of as little as 3.5%. Compared to the ideal down payment of 20% or the typical downpayment of 7%, this is a much more realistic goal for working-class Americans.
VA and USDA Mortgage
The Department of Veterans’ Affairs can help veterans of the Armed Forces become homeowners with an enviable down-payment-free loan. While this is only available to veterans and in some cases their family members, it’s a resource that many people may be eligible for without knowing it. Likewise, you might be eligible for a USDA program that enables people to buy a rural residential home without a downpayment.
Expert Mortgage Services from Potempa Team
There are many different types of mortgages available, and while the conventional mortgage is best for most homebuyers, this isn’t always the case. Every mortgage has a target demographic that it suits even better than the conventional mortgage, and there are special government-insured loans that are well worth considering. If you want to be sure of choosing the ideal mortgage for your circumstances, then get in touch with us and we’ll happily answer all of your questions.