Many potential home buyers leave the decision about mortgage options until the last minute. In reality, mortgage options should be discussed and studied throughout the purchase process. Because there are so many types of mortgages, understanding often overlooked options can make a big difference in a purchase that may take 30 years to pay back.
Buying a home can be the most stressful event in an
individual’s life. From choosing a home
that will hopefully increase in value, to choosing a home in a good
neighborhood, the decision is not easy.
In addition, if you have children, you want to make sure that the school
district is a good one, and will continue to be a good one 10 years from now
when the children are in high school.
And, of course, let us not forget making sure that there are no hidden
problems with the newly chosen home.
Of course, once all of those decisions have been overcome,
then comes the biggest and most important decision of all: how to pay for
home. If you have a limitless checkbook,
simply write a check and save yourself a lot of trouble. However, for most of the rest of American,
financing is the only way to own a home.
The problem arises, however, when the choices of finance
options are presented to the perspective homebuyer. Many people think that financing a home is
similar to financing a car—expect with a much long period of payments.
In reality, there are many types of loans that can be used
to finance the purchase of a home. In
fact, having an understanding of these options can actually mean the difference
between buying the home of your dreams, or renting the apartment that you can
only afford.
It is also important to remember while there are many ways
to finance a home, not all mortgage companies or brokers know of, or have
access to all of these options. As with
anything else, it is good to go into any discussion about home financing asking
a lot of questions. The first person
with whom you speak may not be the best person for your particular situation.
Fixed-Rate
Probably the most well known home loan type is the fixed-rate
mortgage. This type of mortgage is
simply what it says: a mortgage with a fixed interest rate throughout the
entire length of the loan. The advantage of a fixed-rate mortgage comes during periods
when interest rates are low. If you can
lock-in a 5% or 5.5% interest rate and know that you will stay at that level
for 30 years, you don’t have to worry about the possibility of rising interest
rates or inflation.