Here’s what else you need to know about home financing.
When preparing to buy a home, you have to understand the basics of home financing. In other words, you need to know your ability to afford a home relative to the price.
For example, what’s the difference between a 30-year and 15-year fixed mortgage? You’ll get a much better interest rate for a 15-year (or 10-year) fixed mortgage, but I always encourage people to opt for the 30-year fixed mortgage because you never know what can happen in life. It’s a lot better to live with a lower payment than a higher one, even if the interest rate is a little higher. You can always make extra payments. Even if you make just one payment a year, you significantly lower the term of your loan. It’s important to have as much control as you can.
"You need to know your ability to afford a home relative to the price."
The type of loan you get is important as well. If you’re getting down payment assistance or a higher loan-to-value ratio, you’ll pay a higher interest rate. If you’re getting an adjustable loan, it means your rate varies. It usually starts out low and increases up to a certain amount per year. It all depends on your goals. If, for example, you plan on buying a house, fixing it, and flipping it in a year or two, getting an adjustable loan wouldn’t be a bad idea. If you plan on buying a house for your family to live in, you definitely don’t want an adjustable loan.
These are things a good lender will explain thoroughly to you. If you have any questions for me about this subject, give me a call or shoot me an email. I’d love to speak with you.