Choices That Will Affect Your Mortgage Loan

The number of choices and decisions to make when applying for a mortgage loan can be overwhelming, but it is important to consider your options to ensure you are selecting a home loan that will make sense for your scenario, help you meet your financial goals, and has a risk level you are comfortable with. Think through the following choices concerning your mortgage loan program:

• Loan Term The term of your mortgage is the amount of time you will repay the loan back over. The most common loan term is 30 years, but it is far from the only option. Other popular choices are 20, 15, and 10 year terms. If you prefer a lower monthly payment you will probably want to go with a longer term, but for the lowest mortgage rate and to pay off your loan quickly choose a shorter term.
• Amortization Type This refers to how the payments will be spread out across the loan term. Choose between a fixed rate, where the payment remains constant throughout the loan term; an adjustable rate, where payments are based on a low introductory rate for a certain period of time (generally 1, 3, 5, 7, or 10 years) and then the rate adjusts periodically based on the market conditions, or a balloon loan, where small monthly payments are made for a certain number of years and then the balance of the loan is due in a large lump sum.
• Loan Program Which loan program makes the most sense for you will depend on many factors of your scenario, such as your credit profile, amount of a downpayment you want to make, loan amount, and whether you qualify for specialty programs like VA loans (for qualified active duty and veteran members of the US Armed Forces) and USDA Rural Housing Mortgages (for buying a modest home in a rural part of the US.) Other loan program choices include conventional financing, FHA loans, and jumbo loans.
• Loan Purpose Another characteristic of your mortgage is the purpose of the financing. Will you be buying a new home or refinancing an existing loan? Will you live in the property as your primary residence, or will it be a vacation or second home or an investment property?

Find additional resources in the Mortgage Education Center.

Translate: