Top 3 Considerations When Selecting The Right Mortgage For You
When buying your first home, the type of mortgage you take out will have a huge impact on how quickly you're able to pay off your loan and how much you'll pay in interest down the road. At the same time, with so many different mortgage options available, knowing which is best for you can be a challenge. As you consider your options, there are a few deciding factors to keep in mind that will ultimately help you make an informed decision on your mortgage loan.
Your Eligibility
Start by simply finding out what types of loans you may be eligible for. For example, if you're a United States military veteran, you will likely be eligible for a VA loan with some pretty lucrative terms, including a potential zero percent down payment required. Depending on where you're looking to buy or build a home, you might also be eligible for what's known as a USDA Rural Home Loan, which offers zero down payment options, as well. Consulting with a mortgage lender can be a great way to figure out what your options are based on your unique circumstances.
Down Payment
You'll also want to consider how much you can comfortably afford when it comes to a down payment on your home. Certain types of loans (such as USDA and VA loans, as mentioned above) may not require a down payment at all, though this will mean that you're paying a lot more in interest down the road. On the other hand, a conventional mortgage may require a 20% down payment. There are plenty of options in between, so be sure to figure out what you can afford—and don't forget to factor in other expenses, such as closing costs, as well.
Credit Score
What's your credit like? It's always good to check your score before applying for a home loan, as most loans will be contingent on an extensive credit check. If you have poor credit or don't have much in the way of an established credit history, there are still mortgage options available to you. Consider, for example, a Federal Housing Administration (FHA) loan, which is a great option for first-time buyers and only requires a minimum of 3.5% down.
By taking these important factors into consideration when deciding on a mortgage, you'll eventually be able to make the right choice not just for your current financial situation, but your future needs, as well.
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