Types of Mortgages – What Mortgage Should I Choose?

Mortgage loans come in many different shapes and sizes leaving you wondering, “What type of mortgage should I choose?” It’s essential to understand the different types of mortgages available so that you can make an informed decision when buying a home. Let’s take a closer look at the various mortgage loans on offer today.

Fixed-Rate Mortgages

Fixed-rate mortgages are the most popular type of mortgage loan. With this type of loan, the interest rate remains unchanged for the duration of the loan. Typical terms include 15 or 30 years. This makes budgeting easier since you know exactly how much you will be paying for your mortgage each month, every month, for potentially decades. Fixed-rate mortgages typically require a 20 percent down payment, but some lenders may allow lower amounts under certain conditions. All lending companies are not created equal. There tends to be more wiggle room when you work with a lending company versus a bank for example. Click to contact me to find the best mortgage lending companies in Fairfield County, Connecticut.

Adjustable-Rate Mortgages (ARMs)

Adjustable-rate mortgages (ARMs) feature an initial fixed interest rate that adjusts to a variable rate period for the remainder of the loan. The initial time frame for the fixed rate can be 5, 7, or 10 years. This can be an attractive option for those looking to save during the first few years of homeownership. They can be an excellent option for those who don’t plan on staying in their home for longer than 5 to 10 years. And you can refinance out of an ARM when rates improve.

First Time Homebuyer programs

There are many programs designed to help first time homebuyers with their down payment costs. These programs can eliminate some loan terms and upfront fees for first time homebuyers based on their income level. Eligible households that are at or below 100% Area Medium Income (AMI) in may areas of the U.S. and up to 120% of AMI can qualify. Depending on your eligibility some buyers may qualify for a full percentage point reduction in their mortgage rate.

Government-Insured Loans

Government-insured loans often offer better terms and conditions than conventional loans from banks and other private lenders. The two main types of government-insured loans are FHA (Federal Housing Administration) and VA (Veterans Affairs). FHA loans are backed by the government and designed to help people with limited income buy their first home; these typically require a 3 percent down payment and have more relaxed credit score requirements than Conventional loans. VA loans are designed specifically for military personnel and veterans; they come with no required down payment and often have lower interest rates than other types of loans and relaxed qualification standards due to their guaranteed backing by the government.

There is no one size that fits all answer when choosing the right mortgage loan for you; each borrower needs to consider their circumstances before deciding which type of loan is best for them. Fixed-rate mortgages can provide stability over decades, while adjustable-rate mortgages may be beneficial if rates remain low over time; similarly, government-insured loans may be helpful if you qualify due to their often more straightforward terms than traditional bank loans. Ultimately, understanding your options is key when it comes time to finance your home purchase—so research! If you are still asking yourself, “Which mortgage type is best for me?” contact us so we can help: 5-star best real estate agent in Fairfield Country, Connecticut.