Choosing the Right Type of Mortgage for Your Situation

Selecting the Right Mortgage Type for Your Situation
When purchasing a home, you typically have two choices: fixed-rate mortgage or adjustable rate mortgage (ARM). Both loans have their advantages and drawbacks; it’s essential to take into account your individual circumstances before selecting which loan type best suits you.

Fixed-rate mortgages provide predictability and security, so you can better budget your monthly expenses. They may be especially appealing to lower risk borrowers. The term of a fixed rate mortgage can range from 10 to 30 years; longer terms may also be available.

Mayer Dallal, managing director at non-qualified lender MBANC, emphasizes that a fixed-rate mortgage offers protection from rising interest rates and helps prevent negative equity. Furthermore, it offers stability since your interest rate remains fixed throughout the life of the loan.

Arms, on the other hand, come with risk and volatility as interest rates can change during your loan’s term. They aren’t suitable for everyone – so make sure you understand how an ARM works before applying.

Interest-only mortgages are a popular option for first-time buyers and others looking to break into the housing market without needing a significant down payment. Unfortunately, interest-only mortgages tend to be expensive and may not suit those looking to build equity in their home over time.

Adjustable-rate mortgages have become increasingly popular due to their low initial rates, which can help borrowers save money in the short term. They’re an excellent option for those who plan to refinance or sell their homes within a few years.

Purchasing a home is one of the largest financial commitments you’ll ever make, so it’s essential to select a mortgage that meets your individual requirements. The two most common options are conventional fixed-rate mortgage and adjustable rate loan, but other loan types may be available as well.

Conventional Fixed Rate Mortgages Conventional fixed-rate mortgages are the most popular type of home loan and may be issued by banks, credit unions or online lenders. They’re best for borrowers with excellent credit – typically those with a FICO score of 740 or higher – as they have established income guidelines as well as debt-to-income ratios for personal financial information.

Conforming – Conforming loans are those that meet Fannie Mae and Freddie Mac requirements. They usually go to borrowers with excellent credit, typically having a FICO score of 740 or higher and an income-to-debt ratio no greater than 43 percent.

If you’re uncertain which loan type is ideal for your situation, speak with an expert to learn more. You may also compare mortgages on your own or apply today to see which option works best.

An interest-only mortgage may be the ideal way to keep your housing expenses down during times when you don’t expect a high salary, such as when studying or working towards promotion. With this type of loan, you can pay back the mortgage with future income – ideally over five or ten years’ time – creating equity for future use.

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