SUMMARY: Finding a mortgage is like finding the right sized shoe, it's not a one size fits all!
Buying a house is one of the biggest decisions that you're ever going to make, and it's important to examine all the options available to you.
Mortgages come in a variety of different rates, different lengths of time, and even in a variety of different lending options. Finding the right mortgage is simply a matter of knowing what the different types of mortgages are.
Fixed rate mortgages
The fixed-rate mortgage is a loan that gives you an interest rate that is "locked" in for the term of the loan. When it comes to fixed-rates, however, what type of term is right for you? That depends. There is a 30-year fixed-rate, designed to allow individuals who plan on staying in their homes for a long period of time to have a lower monthly payment. There is also a 15-year fixed-rate mortgage. This particular loan was created for people looking to pay off their mortgage loan more quickly than with a 30-year loan.
If you're looking to purchase a home that will require a mortgage loan that exceeds $417,000, what type of mortgage is right for you? In most cases, you're going to need to amortize the loan over 30 years, these types of loans are considered jumbo mortgages, and the lender themselves have to hold the debt on. This means the lender actually is taking on more risk with the loan, which is why you can expect to pay higher interest rates than on other loans. Also, you'll probably have to work harder to find a lender willing to work with you—but not when you deal with us, because we make Jumbo loans easy!
An adjustable-rate mortgage, also known as an ARM, is a loan that does not have a fixed rate. There is usually an introductory fixed rate period (for one to ten years), followed by a rate based on current interest rates. If interest rates go down through the passage of time, your rate will lower. However, if interest rates go up, you'll be paying more than you might originally have expected. Many of the people who take out ARM loans don't intend to stay in their homes for any length of time.
If you're looking to buy a home from someone wanting to transfer the mortgage, what type of mortgage is right for you? The answer is an assumable mortgage. Basically, you'll simply take over the remainder of the payments, at which time, the house will be yours. The benefit to taking over an assumable mortgage is that, with lender approval you may have less paperwork and still receive a great rate.
Which mortgage is right for you?
In the end, it's a decision that you'll have to reach on your own -- or with the help of a mortgage professional at TDECU. By examining your finances and studying your budget, you should have a good idea as to the loan that's best suited for your own needs. Visit TDECU.org or watch our TDECU Mortgage video playlist for more information!