Before you can determine which loan is right for you, you need to have an understanding of how each work and the costs and benefits of each. Your mortgage broker will be able to assess your situation and make recommendations for different loan solutions that will be a good fit. However, here is an overview of some of the mortgage products available:
Fixed Rate Mortgage: Fixed rate mortgages are exactly that – the mortgage rate remains fixed for the life of the loan. Monthly payments are fixed (for the principal and interest) so they are predictable.
Adjustable Rate Mortgage: These are also called ARMs. This type of loan has the potential to have monthly payments that change since the interest rate can change.
It is important to have an idea of your future plans when determining the ideal type of loan. This is information that you should also share with your mortgage broker. Are you planning on staying in your home for three years? Ten years? Twenty or more? Your plans may indicate that one plan is better for you than another.
In addition to the fixed rate mortgage and adjustable rate mortgages, mortgages may also be either “conventional” (meaning funded by the private sector – usually a bank) or a “government-backed” loan. The government agency is “insuring” the loan, although the funding may still be by a bank. Below are the most-typical types of government loans that are available in the Seattle area:
FHA (Federal Housing Administration) Loan: The three benefits of this loan are the low down payment, lower credit score requirements, and additional monies to fix the home up can be included in the loan amount. I have a full list of our local FHA-approved lenders in the event these loan parameters sound like a good match for your needs. The drawback to an FHA loan? Government mortgage insurance is an additional expense you will need to cover.
VA Loan: These are managed by the Department of Veteran Affairs and are reserved for military service members. The benefit of a VA loan is it does not require a down payment. If you are a military service member, I can help you find a property, but when it comes time to apply for the loan, your Veterans Administration office will point you in the right direction and help you with the application process.
Your mortgage broker will guide you through the ins and outs of each type of loan, and help you determine the best loan for your needs and comfort level.