I want a low monthly payment. What type of mortgage should I look for?
The standard 20% down, 30-year fixed rate loan will keep your payment low. For example, if you plunk down 20% or $50,000 on a $250,000 property, your monthly payment would be around $990. Other mortgage options, while possibly helping you build equity faster, could add more than $450 to your monthly payment on that home.
What if I can’t afford a conventional mortgage?
Not everyone is able to afford 20% down payment on a home. Luckily, there are mortgage options that require less cash up front and can help you become a homeowner.
A 10% down payment loan with private mortgage insurance or a Federal Housing Administration (FHA) loan require less money from the buyer upfront. However, it does mean you will have a higher loan balance and will be paying more money each month. It also means you will have less equity in the home when you are ready to sell because you have also been paying mortgage insurance premiums.
However, if you can handle the higher monthly payment, but just don’t have the money saved for a large down payment or conventional mortgage, these options could be right for you.
I want to pay off my mortgage before my kids got to college. How can I do that?
A 15-year fixed rate loan could help you reach that goal. With this type of mortgage, you are paying off your loan principal faster and gaining equity in your home more quickly. On the flip side, you will have a much higher monthly payment. It is a great way to gain equity. The trade off is you will have less cash on hand for other expenses as they come up.
I am downsizing to a smaller, less expensive home. Do I still need a mortgage?
One of the smartest things you can do is commit to a home that meets (and doesn’t exceed) your needs. You can avoid monthly payments and interest altogether by paying for your home in cash. Plus you are building equity as your home’s value increases over time.
I am not sure how long I will live in my current city. Does it still make sense to buy?
How long you stay in a home is an important consideration when deciding to purchase a home and take out a mortgage. As we have mentioned before it could take 5 years before your recoup the initial cost of purchasing a home
