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What Type Of Mortgage Is Right For You?

Kat Sellis, MBA

Kat and her team are hard working agents with Real Brokerage, in beautiful East Bay of Northern California surrounded by Napa Wine Country, San Franci...

Kat and her team are hard working agents with Real Brokerage, in beautiful East Bay of Northern California surrounded by Napa Wine Country, San Franci...

Feb 7 4 minutes read

Before you start picking out curtains and furniture for that new home, there are some financing decisions that need to be made. Determining what type of mortgage is best for you and your family may seem intimidating, but there is one out there that’s right for you. Keep reading to find the mortgage that best fits your needs.

I want a low monthly payment. What type of mortgage should I look for?

The standard 20% down, 30-year fixed  rate loan will help keep your payment low. For example, if you plunk  down 20% — or $50,000 — on a $250,000 property, your monthly payment would be $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?

Let’s face it — not all of us have a 20% down payment socked away in the bank. But there are mortgage options that require less cash upfront 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. But it does mean you’ll have a higher loan balance and will be forking over more money each month. It also means you’ll have less equity in the home when you’re ready to sell because you’ve 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’ve got two toddlers and want to pay off my mortgage before they head 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’re  paying off your loan principal faster and gaining equity in your home  more quickly. On the flip side, you’ll have a much higher monthly  payment.

It’s a great way to gain equity. That is, if your budget can handle  it. The trade-off is you’ll have less cash on hand for other expenses as  they come up. (And with small children, unexpected expenditures are almost a guarantee.)

I’m not sure how long I’ll 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’ve outlined before, it might be five years  before you recoup the initial costs of purchasing a home.

If you’re certain you won’t be  staying put much longer than five years, options that get you the most equity in your home — such as a 15-year or 30-year mortgage — are good  ways to go.

What else should I be thinking about when considering buying a home and taking out a mortgage?

Most real estate  professionals recommend shopping around, obtaining information from  several lenders to ensure you’re getting the best price. You can also  work with a mortgage broker to find a lender. Securing a home loan can take anywhere from a few weeks to a few months, so it pays to do your homework.



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