Ultimately, the best mortgage for you is the mortgage that best fits your needs and matches your preferences. Umm, but you probably already may have suspected this. So let us look closer at what is the best mortgage for you.
Literally, just about everyone's financial situation is a little bit different so the best mortgage for you is based primarily on:
- Your Interest Rate Risk Preferences
- What You Want or Need
- Your Credit Report and Credit Scores
- Your Cash Assets In The Bank, Income or Ability to Qualify for a Down Payment Assistance Program
Risk Preference Can Determine The Best Mortgage
For example, if you are conservative and not that interested in taking a risk then the 30 year fixed mortgage program from Fannie Mae or Freddie Mac or FHA is probably your best bet. Since many people do not like to take too many risks with their home, the 30 year fixed mortgage is the most popular mortgage among all home owners. It is also the easiest to qualify for.
One thing to keep in mind, in a normal mortgage market, is that the higher the risk loan typically translate into lowest interest rates - at least for the fixed period. This means that if you got a 3 year ARM that adjusts monthly after the third year you would get a lower interest rate than you would if you got a 30 year fixed rate mortgage.
What You Need May Help Determine The Best Mortgage
If you are only planning on staying in a home for a few years, you may consider a more higher risk mortgage called an adjustable rate mortgage. Adjustable rate mortgages have a fixed rate period to them that typically last 3-10 years. After the fixed period, the interest rate can adjust monthly to annually depending on the type of adjustable rate mortgage you have.
Credit Can Determine The Best Mortgage For You
This is better said as the better credit you have the more mortgage options you have. Higher risk mortgages like shorter term adjustable rate mortgages and interest only mortgages are only available to you if you have credit scores above 720 for example. You also may only qualify for an FHA home loan if you have a credit score of less than 660.
You also may have your choices for a mortgage program limited by a prior bankruptcy or a foreclosure. For example, if you are looking to buy a home within the third year after a bankruptcy, you may only qualify for an FHA home loan.
Money For Down Payment Will Help You Decide What Is the Best Mortgage
If you have little money to put down on a home then you may have to opt for an FHA home loan program where you only need 3.5% down payment. Of if you want to purchase a Fannie Mae foreclosed home and have little money to put down, you may consider using the HomePath Mortgage Program. In either case here you may need to learn about down payment assistance programs as well as first time home buyer programs as you look for the best mortgage for you.
Best Way To Decide On Which is the Best Mortgage For You
- The best way to decide is to first learn about mortgages. You need to learn about what a fixed rate mortgage is versus an adjustable rate. You will also want to know what it means to get an interest only mortgage or a no down payment mortgage. Other things to learn about are first time home buyer programs as well as down payment assistance programs.
- Once you have learned about mortgages to some degree, your next step is to contact a mortgage company or bank and speak to a loan officer. In speaking to a loan officer you'll be able to learn what mortgage options are available to you given your credit history and credit scores as well as your income and assets that you have.
- Always remember this tip: if you have a question about a program and the loan officer does not mention it to you then you should ask them about it. The only dumb question is the question you do not ask. If you do not ask, you may not get the best mortgage for you.
