Sunday, October 3, 2010

First-Time Home Buyer: Choosing the Right Mortgage Product

As a first-time home buyer you are sure to be worried about every last detail. This is particularly true when it comes to choosing the right mortgage product. If you are not aware of the many types of mortgages, you should take a step back and learn more before you make a decision on which home to purchase.

Choosing the right mortgage product is based on many details. Above all else, you have to select the loan that you feel will suit you, your home, and your finances the best. Keep in mind that you will be paying on your mortgage for many years to come. So don’t choose something that is fine for now, but may put you in a bad position later.

A fixed rate mortgage is the safe bet. The most common options are 15 and 30 year loans. With these, you know that your rate will stay the same for the term that you choose. In turn, your payment will also stay the same, give or take a couple of dollars, as the years go by. Knowing that your payment will never change makes it much easier to budget for both the short and long term.

What about an adjustable rate mortgage? This is a product that sounds good on the surface, but is often times passed by for a more conventional fixed rate product. An adjustable rate mortgage is just what it sounds like: your rate adjusts, from time to time, based on several factors. This means that your payment will never stay the same for too long. Along with this, there is a good chance that it could jump high which could put you in a compromising position. The main benefit of an adjustable rate mortgage is that you can often times afford a bigger mortgage, due in large part to a lower initial rate. On the downside, your payments and interest can go up in the future. Are you prepared to deal with that risk?

First-time home buyers have to make a lot of decisions. What type of mortgage is best for you? If you want to learn more, get in touch with a few lenders and ask them about the products they offer. Soon enough you will have a better understanding of which mortgage product will suit you best as a first-time home buyer. As long as you are comfortable with this financial decision, you can move onto the other factors of buying a home for the first time.

2 comments:

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