Helpful Mortgage And Real Estate Advice

How Do I Choose The Best Loan Program For Me?

By on November 18, 2013 in Mortgage Programs, Mortgage Videos

Choosing the right loan program depends on a number of factors, and there’s no single answer for every borrower. Examining a borrower’s current financial situation, future financial plans, and the length of time a borrower expects to own or live in a home will help guide the process of choosing the right loan.

Before speaking with a loan officer or potential lender, discuss the following to help determine which mortgage route to take:

1. What is the family’s current financial health?

A borrower’s current financial standing is one of the largest influences on the loan terms offered by a lender. A heavy debt load may make lenders wary or mean a higher interest rate. Most borrowers will use a simple mortgage calculator to figure out maximum monthly payments, but it’s essential to add other costs of home ownership in such as HOA fees, utilities, and home maintenance costs.

2. Are there any changes expected in income or finances?

Sometimes a borrower may be able to estimate increases in income due to expected changes like promotions or a member of the family returning to the work force. Increased future income might mean that an adjustable-rate mortgage might be the way to go since the potential for higher payments in the future wouldn’t present fiscal trouble.

3. Will the house be a permanent home or temporary residence?

Conventional wisdom suggests that a family who expects to live in a home for many years would benefit from paying off a mortgage quickly, with a 15-year-term, for example. However, a family who wants to live in a home for just a few years, wouldn’t need the long-term benefits of a fully paid mortgage and might benefit from a 30-year-term and low monthly payments.

4. Does the family prefer variable or fixed payments?

Some borrowers enjoy the predictability of an unchanging monthly mortgage payment and would fare best with a fixed-rate mortgage. A fixed-rate mortgage allows for decades of accurate financial planning. Other future homeowners might be comfortable with the changing payments of an adjustable-rate mortgage, and the potential savings on interest on such a loan.

Further considerations, such as the age of the borrower and whether the family wishes to be debt-free upon reaching retirement age, will also influence the loan term and type of loan that might represent the best investment. With these considerations in mind, a lender can help a family to make the best decision on the loan program.

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About the Author

About the Author: Jessica Lucas is the managing editor for Mortgage Home Base, a top real estate finance blog dedicated to helping borrowers and home buyers understand the home loan process. Follow Jessica on Google +, and share your comments here. .
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