Three Types of Mortgages
One of the largest financial commitments you will probably make in your lifetime is a mortgage. Rushing into a decision on this matter is a very bad idea that can cause you huge losses and lots of headaches. So do your homework and take time to study your options before committing yourself to a lifelong decision.
Depending on your financial situation, you can find a mortgage option that best applies to your case. It will take from 20 – 40 years before a mortgage matures. Therefore, understanding the implications of the mortgage on your finances is a primary concern prior to agreeing on the terms of the loan. You can get a good idea of what type is best for you if you look into some of the advantages and disadvantages of each type of mortgage agreement.
Here are some helpful information to guide you in your choice.
But before anything else, you need to be sure why you are applying for a mortgage, what you need the money for. It is helpful to answer this first so you know what type of agreement is ideal for your situation.
1) Will a fixed rate or adjustable rate mortgage be best for you? A fixed rate mortgage is a loan that has the same interest for the entire duration of the mortgage. In an adjustable rate mortgage, on the other hand, the interest rates change. What suits you best, paying the same amount of money each month; or venturing on the possibility of lower interest rates because of adjustments?
But fixed rate mortgages are the most popular type of mortgage. Fixed rate mortgage is ideal for people who plan to stay forever in the property; while adjustable rate mortgage is ideal for those who plan on moving.
2) Will a government insured or conventional mortgage be best for you? Next, you need to determine if you want a government insured loan or a conventional one. The advantage of a government insured loan is that you have a guaranteed backing from the government; while in conventional loans there is none.
3) Will a conforming or jumbo loan be best for you? The next step is to determine whether a conforming loan or a jumbo loan is ideal for your situation. This depends on the amount of money you need, if it is a small amount or a huge one. For smaller amounts of money, conforming loans would be ideal; but for larger amounts, you need to apply for a jumbo loan.
Study your options and do your research in order for you to arrive at a safe and sound mortgage decision.