Your Mortgage Options – Find Out What Type Works For You

Many homeowners are being struck with the reality of the spike in mortgage rates. Hitting 5% on April 14, 2022, many potential homebuyers are seeking other ways to afford high home prices, with more buyers turning to adjustable-rate mortgages. If you are a potential homebuyer, or a current homeowner, it is important to understand your mortgage options.

Different loan options each have their advantages that fit an ideal borrower. You should know about all your options including a Fixed-rate, adjustable-rate, FHA, VA and jumbo mortgage, and make the most informed decision. For each of the different types of mortgage loans listed above, you’ll learn about their benefits and requirements.

15-year fixed-rate mortgage

The 15-year fixed-rate mortgage is a loan that maintains the same interest rate for the 15-year time span. These types of loans are best for home refinancers and home buyers who are looking to build equity and pay off their loans at a faster rate. Payments for this loan are constant and predictable as the interest rate does not change. Total interest payments for this loan are overall less although monthly payments are typically higher.

30-year fixed-rate mortgage

Similar to the 15-year fixed-rate mortgage, the 30-year fixed rate mortgage is the most popular option  with an interest rate that stays constant for the 30 year term. These loans are best suited for home buyers who want a lower monthly payment over a longer period of time. The payments for this loan are constant and predictable as the interest rate does not change over time.

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Adjustable-rate mortgage

An adjustable-rate mortgage is a loan with an interest rate that is constant for a certain period of time, and then changes. Initial rates can stay constant for up to one, five, seven, or ten years. This type of home loan is best for home buyers who don’t plan on having a mortgage for a long period of time, and home buyers who anticipate interest rates to decrease in the future.

FHA mortgage

An FHA mortgage is a loan that is supported and insured by the Federal Housing Administration. FHA loans are supported by the government and are designed to help home buyers with lower credit scores. These mortgages are best suits for home buyers with lower credit and down payments less than 20%.

VA mortgage

VA mortgages are loans that are supported by the Department of Veterans Affairs. These loans are available to military service members and veterans. These loans are best for veteran home buyers who need a low interest rate and no down payment minimum.

USDA mortgage

USDA home loans are mortgages backed or issued by the U.S. Department of Agriculture.They typically require zero down payment and are best suited for homebuyers in rural and some suburban areas. USDA loans also offer home improvement loans and grants.

Jumbo mortgage

Jumbo mortgages are home loans that exceed a certain dollar amount. Jumbo loan limits vary by county and are adjusted periodically. These loans are best for home buyers who purchase expensive homes and owners who want to refinance jumbo-size mortgages. These types of loans can have fixed or adjustable rates, and often require a credit score of 700 or higher.

Interest-only mortgage

An interest-only mortgage requires payments only on the lender’s interest charge. The loan balance, or principal, is not lowered during the interest-only payment period. This type of mortgage is best for borrowers with a high monthly income, large cash savings, or an income that varies from month to month. This loan is useful to home buyers who don’t expect to live in the same property for the long term. Typically, borrowers will have to prove substantial assets or income to lenders to show credibility.

With so many options to choose from, it is important that you consider your specific financial situation to know which mortgage route works for you.