When you’re ready to start looking for a home, the best thing you can do is get a pre-approval for your mortgage. But what mortgage option should you choose? Depending on your situation, different mortgages can be better for you. Here is a guide on how to choose your mortgage.
Explore Mortgage Options
A variety of mortgages are available with varying down payment and eligibility requirements. Here are the main categories:
Conventional mortgages are not guaranteed by the government. Some conventional loans targeted at first-time buyers require as little as 3% down.
FHA loans are insured by the Federal Housing Administration and allow down payments as low as 3.5%.
USDA loans are guaranteed by the U.S. Department of Agriculture. They are for rural homebuyers and usually require no down payment.
The Department of Veterans Affairs guarantees VA loans. They are available to current and former military personnel and normally do not demand a down payment.
You also have choices when it comes to the length of your mortgage. The majority of home buyers choose a 30-year fixed-rate mortgage, which is paid off in 30 years and has a fixed interest rate. The interest rate for a 15-year loan is usually lower than on a 30-year loan, but the monthly payments are higher.
First-Time Homebuyer Programs
Many states, as well as some towns and counties, provide first-time homebuyer programs that often include low-interest mortgages, as well as down payment and closing cost help. Some first-time homebuyer programs provide tax rebates as well. Searching for first-time homebuyer programs can help you save money.
Obtain a Pre-Approval Letter
A mortgage pre-approval is an offer from a lender to lend you a particular amount of money on specific terms. A pre-approval shows sellers and real estate agents that you’re serious about buying a property, and it can provide you an advantage over other buyers who haven’t gone through the process yet.
When you’re ready to start looking for a home, apply for pre-approval. To verify your income, assets, and debt, a lender will retrieve your credit report and review documentation.
Ready to get started with buying a home? Contact us at 303-458-6660 or lending@rmlefcu.org.