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Buying a home represents a dream come true for many individuals. However, to transform this dream into a reality, you'll likely need to qualify for a mortgage.
Finding the right mortgage may seem difficult, particularly for a first-time homebuyer. Fortunately, we're here to help you make sense of all of the mortgage options at your disposal so you can select the right option based on your budget and lifestyle.
Here's a closer look at three of the most common mortgage options for homebuyers.
With a fixed-rate mortgage, there are no cost fluctuations. This means that you'll pay the same amount each month for the duration of your mortgage, regardless of economic conditions.
For example, if you sign up for a 15- or 30-year fixed-rate mortgage, you'll wind up paying the same amount each month until your mortgage is paid in full. In some instances, you may even be able to pay off your mortgage early without penalties.
A fixed-rate mortgage often serves as a great option for those who don't want to worry about mortgage bills that may fluctuate over the years. Instead, this type of mortgage guarantees that you'll be able to pay a consistent monthly amount for the life of your loan.
An adjustable-rate mortgage represents the exact opposite of its fixed-rate counterpart. The costs associated with this type of mortgage will change over time, which means you may wind up paying a fixed interest rate for the first few years of your loan and watch this rate go up a few years later.
For instance, a 5/1 adjustable-rate mortgage means that your interest rate is locked in for the first five years of your loan. After this period, the interest rate will adjust annually. Therefore, a rising interest rate may force you to allocate additional funds to cover your mortgage costs in the future.
An adjustable-rate mortgage may prove to be a viable option if you plan to live in a home for only a short amount of time. Or, if you're a college student or young professional, an adjustable-rate mortgage may help you pay less for a home now, secure your dream job and become financially stable by the time your initial interest rate period ends.
3. VA Loans
The U.S. Department of Veterans Affairs (VA) provides loans to military service members and their families. These loans are backed by the government and enable individuals to receive complete financing for a house. Thus, with a VA loan, an individual is not required to make a down payment on a house.
If you ever have concerns or questions about mortgage loans, banks and credit unions are available to help. Also, your real estate agent may be able to offer mortgage insights and tips to ensure you can secure a mortgage quickly and effortlessly.
Learn about all of the mortgage options that are available, and by doing so, you can move one step closer to buying a home that matches your budget and lifestyle.