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Which Type of Mortgage is Best for You?

Choose the Best Mortgage for You 

If you are looking for a mortgage for your home, the sheer number of options can be dizzying.
Not only do you have to decide between loans that have fixed or variable interest rates, but there are also a number of specialty mortgages on the market.
When you are deciding which mortgage is right for you and your family, it’s helpful to know the pros and cons of each option. With a bit of research and an understanding of what type of mortgage you qualify for, you can make a solid decision on the best mortgage for you.
Here are a few common types of mortgages and a primer on how they can work for you.

Fixed-Rate Mortgage

The most common form of mortgage is one with a fixed interest rate.
Fixed-rate mortgages often come with one of two terms: 15 or 30 years. With a fixed-rate loan, your interest stays the same throughout the repayment period, giving you predictability with your monthly payments.
However, unlike a variable interest rate loan, fixed-rate loans typically start off with higher interest rates. If you choose a 30-year loan, you could find interest rates in the range of 4 to 5 percent. With a 15-year loan, you may secure lower interest rates, but your monthly payment will be significantly higher.
Overall, a fixed-rate loan is great for investors looking for predictable payments on their loan. However, you should prepare yourself for higher interest than introductory rates on a variable interest loan.

Adjustable Rate Mortgage

Also known as a variable interest rate loan, an Adjustable Rate Mortgage (ARM) provides a low introductory interest rate that is subject to change after a certain time period.
ARMs are great for investors looking for a low-interest rate to start. Also, ARMs are a good investment if you think home loan interest rates will decrease over time.
Traditionally, ARMs allow home buyers with lower credit scores to secure a mortgage due to the uncertainty of interest rates. However, that same uncertainty can put homeowners in a bad position if they haven’t prepared for their interest rates to increase.
Overall, an ARM gives home buyers a low barrier of entry for interest with the possibility of interest rates declining in the future. However, the uncertainty of future interest can be a major hurdle.

FHA Mortgage

If you’re a first-time home buyer, a mortgage through the Federal Housing Administration could be a great option.
An FHA loan allows cash-poor investors to get into a primary residence with low down payments and competitive interest rates.
However, FHA loans do require fairly strict requirements on paperwork and how the home must be used. For instance, you can only qualify for an FHA loan if you plan to live in the home.
For investors, that means you can’t qualify.

Overall, an FHA loan is a great option for cash-poor or first-time home buyers looking to get into a home with competitive interest. 
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Location: Austin, TX, USA

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