If you’re looking into owning a home in Sacramento, CA and securing financing for it for the very first time, this can simultaneously be a very exciting and uncertain experience. There are going to be a lot of new things to consider, and one of your biggest hurdles will be making sure that you get the right kind of mortgage. The mortgage you secure is going to be a path you will follow for years, and you want to get it right because property prices are very high in the USA right now, and this uncertainty doesn’t look like it’s going to dissipate anytime soon. So which mortgage is right for you?
There are a few to look into, but here’s a good list to start.
FHA First Time Loan
These First Time Home-Buyer Loans issued by the Federal Housing Association have easier qualifications, so even if you have a credit score under 700, that’s not a barrier to entry. The initial down payment is also more forgiving, usually only about *3.5% of the total home price, whereas many other mortgages start at *10% and may go up from there!
There are, however, a few caveats. First is that you will be locked into a *30 year fixed rate mortgage, which may actually be an issue for people wanting a shorter duration. The other is that there may be restrictions on which homes an FHA loan will be approved of.
Fixed Rate Mortgages
This is a familiar, standard type of mortgage that just about anyone can apply for, though of course, they need to qualify and get approved before they can make use of it. Like the FHA loan, this is a fixed rate of interest, meaning that the interest rate assigned to the mortgage when it is approved is the one that you will be paying for the duration of the mortgage. This means that, depending on what the climate for interest rates is at any given time, you may get interest rates that are higher than what people on other similar mortgages experienced.
Fixed rate mortgages, however, come with a lot of different lengths. They can be 10, 15, 20 or 30 years. So there’s a lot of flexibility in that regard. However, fixed-rate interest mortgages do have one major consideration; the majority of your early payments will go towards interest, not the principal amount of the mortgage.
Adjustable Rate Mortgage
This type is the exact opposite of the fixed rate! While you can also get this at varying durations, the biggest feature of this mortgage is the fact that interest rates can adjust with the prime rate every year. So while that’s a good thing when interest rates drop, it can also mean higher rates the year after.
This is a good idea for people that can afford a little bit of flexibility in their payments. The higher payments due to fluctuating interest rates can be offset by lower payments if those fluctuations drop in your favor! If you can ride out the higher periods, you may ultimately save in the long run.
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