Just like your first home, there is no one-size-fits-all type of mortgage. The benefits are many options for mortgage types. Below we will talk about some things you should research to assess what options are best for yourself and your family. It’s advisable to get an agent to assist with the process, they get paid to help you figure it all out.
Types of Loans
There are typically 5 different types of mortgages. There are conventional loans, jumbo loans, government-insured loans, fixed-rate mortgages, and adjustable-rate mortgages. Once again, it may seem daunting but it is because there are a lot of options and actually can be beneficial to someone’s individual financial needs and situations. To determine your specifics, use a house payment calculator.
Conventional loans also break down into different categories as well, depending on things such as your credit and may or may not meet standards of the FHFA. Benefits with these kinds of loans are lower costs and pay a small percentage down. These loans are for assisting home buyers in certain ways but you may still need to pay for Private Mortgage Insurance if you put down less than 20%.
Government-insured loans are backed by government agencies that assist with individuals that are in the military or may not have the ability to provide a large down payment. These agencies make it possible for homeownership to be more attainable. The best benefit here is that you get more relaxed requirements and they are available to first time and repeat buyers.
What Is Best for You?
Being that there are so many types of loans, most people should be able to be a homeowner even if you aren’t in the best boat. Initially, you should establish yours and your partner’s credit score. You should pull a full credit report so you can assess what is affecting your score and ways that you may be able to adjust that.
There are some rules to credit that I’ve learned over time. If you have defaults or collections, get them paid off. Best of all, don’t allow purchases to get to that point at all. However, sometimes we are in situations that we don’t have much control over. Look into what you can get paid down quickly and has the most impact on your score. Most reports will tell you what is the highest and lowest impact.
Additionally, you may not have enough credit. Some people never learn about credit but just hear bad things and actually, it is very vital to living in a capitalist country. It’s important because your credit determines your ability to do awesome life things like owning a home.
Once you’ve been able to understand your score and your level of risk for a mortgage, research what options are best for you. It is recommended to speak with a financial advisor that is privy to your income and spending habits. A real estate agent can come in handy as well.
If nothing else, putting more money as a downpayment will yield better results. As they say, cash is king. This is because when lenders weigh risk, they can visibly see your ability to pay when you show them your savings. The younger you start saving, the better. Although many of us don’t learn how to do this properly.
It starts with will power and understanding of various economic markets. Hopefully, you get started with a type of savings account if your parents or guardians had the ability and foresight. I was not a product of foresight, so I learned much on my own.
Even if you are able to put $10 a week away, and really not spend that money, you could soon be on your way to purchasing a home. You’ll need some sort of down payment regardless of what type of mortgage you choose.