Tips for Choosing the Best Mortgage – How Much Down Payment You Need

12 Things You Should Know Before Buying A House

As you conduct your research before buying a home, you will hear a lot about 20% down payment. If you can afford this, you will enjoy lower monthly payments and not have to pay mortgage insurance. If you have saved up enough money, you should put down at least 20% of the home’s value.

However, you should not worry too much if you cannot find this down payment. You can opt for FHA loans, which are funded by the government. With this mortgage, you can put down as little as 3.5 percent down payment. You will also pay lower closing costs but the downside is higher rates of interest.

If you are a veteran or the spouse of one, you can buy a house using a VA loan. With this loan, you do not need to make a down payment, and you will not have to pay private mortgage insurance. However, a one-time funding might apply, but you can reduce it by making a down payment. To figure out whether you can afford a down payment, you should use online tools such as a mortgage calculator.

Decide How Long You Will Be Staying

Before buying a home, you need to ask yourself how long you will be staying in it. If you only want to stay in a house for a few years, you would be better off renting. What type of mortgage will work better for you? You can choose between an adjustable-rate or fixed-rate mortgage.

When you opt for a fixed-rate mortgage, you will pay a fixed rate all through the life of your mortgage. If the rates of interest drop, you can choose to refinance your loan. When you choose a fixed-rate loan, you will know exactly how much you need to pay per month, which is appealing if you plan to stay in the house for a long time.

On the other hand, an adjustable-rate mortgage starts with low rates, which will re-adjust annually after 5-7 years depending on the market conditions. If you sell your home before the five-year mark, you will not have to deal with the high rates. Just remember that after the low-payment period ends, you will be at the mercy of market rates and your monthly payments will be unpredictable.

Find out How Much It Will Cost

Once you choose the right mortgage for your financial needs, you will know what to expect financially. However, you still need to find out if there are any other hidden costs. After applying for your mortgage, your lender should give you a loan estimate after three days. This estimate will give you an idea of the monthly payments, closing costs, and interest rates on the loan.

Your home insurance and property tax estimates will also be stated. Moreover, you will see special conditions that your loan might have. Although different lenders offer different terms and mortgages, a loan estimate is the standard that all of them use.

As soon as you find a home that you love, you need to find out whether you can afford it. Finding the perfect home is only half the battle because you still have to find financing. Once you take stock of your finances, you can select the right mortgage for your budget. If you are wondering how to choose a mortgage, here are some tips that will come in handy:

Figure on, you need to do some due diligence. You do not want to end up with monthly payments that you cannot afford and too-high interest rates.

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