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Congratulations! You’ve found the house of your dreams and determined that buying it is the right step. But there are a lot of things to consider first.
Is this your first time buying a home? Did you know that the type of mortgage you choose can affect your life for the next thirty years? Considering your options before getting the mortgage of your dreams is smart.
Are you interested in learning more about mortgage options for first-time homebuyers? If so, then you’re in the right place. Keep reading to discover the types of mortgages for first-time homebuyers.
Conventional Loan
A conventional loan is one that is not backed by the government. This means buyers who want low-interest rates, and smaller down payments may be interested. The buyer must have good credit and a steady income for this type of loan.
There are fewer fees with this type of loan, and you can buy discount points to lower the interest rate. The down payment requirements can be strict, especially if you are looking for a high-end property.
Jumbo Loan
A jumbo loan has higher interest rates than conventional loans but allows for larger loan amounts so buyers can purchase more expensive homes. For first-time buyers, jumbo loans can also offer flexible repayment terms and competitive rates, so depending on the situation, this could be a great option.
Ultimately, by researching different options and discussing them with a trusted lender, first-time buyers can find the best options that fit their needs.
Adjustable-Rate Mortgage
An adjustable-rate mortgage (ARM) is a type of mortgage for first-time home buyers that offers a fixed interest rate for a set period of time. Their home loan usually is five to ten years but can be adjusted every year thereafter based on the economic conditions of the market.
Since ARM rates follow the market rates, it can be advantageous to those looking to invest in a new home. However, its rate can fluctuate significantly, so it’s important to be aware of the potential risks. An ARM may be a great choice for a first-time home buyer, especially if they plan to move or refinance before the rate adjustment.
Fixed-Rate Mortgage
Fixed-rate mortgages are a popular choice for first-time home buyers due to their security and predictability of monthly payments. With a fixed-rate mortgage, borrowers can lock in an interest rate that will remain consistent throughout the loan, making budgeting easier.
Shorter repayment periods from mortgage lenders lead to higher monthly payments but less interest owed in the long run, whereas longer repayment periods lead to lower monthly payments but more overall interest paid. A fixed-rate mortgage allows first-time home buyers to plan their finances with confidence. It can also be beneficial for people who plan to remain in their homes for an extended period of time.
Knowing the Types of Mortgages
Choosing the right mortgage is essential for comfortable monthly payments and financial security, especially for first-time homeowners. With so many options to consider, researching different types of mortgages can be incredibly beneficial for making the best decision for you and your family.
Don’t put it off- speak with a financial advisor today to determine which mortgage type is right for you!
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