When you’re on the precipice of buying a new home, there are a lot of variables that you’ll need to consider in order to ensure that you’re getting the right home at the right price. To this end, one of the biggest decisions you’ll have to make will be regarding the home loan you choose, since you’ll be paying off this loan for years and years to come.
To help you in making the right decision here, here are three things to consider when picking the right home loan for your financial situation.
The Mortgage Type You’ll Qualify For
The first thing you’ll need to think about is the type of mortgage that you’ll want. In most cases, the type of mortgage you choose will be based off of what you’re able to qualify for.
According to Deborah Kearns, a contributor to Investopedia.com, there are six main types of mortgages you could get when buying a home. The ones you qualify for will depend on things like your credit, if you’ve bought a home before, how big of a loan you’re trying to get, where you’re buying your home, and more. As a general rule, you should try to qualify for whatever loan is going to give you the best possible terms, which will vary based on which mortgage type you’re offered.
What Type Of Interest Rate You’re Comfortable With
Along with the mortgage type, you’ll also need to think about what type of interest rate you’re comfortable with for your current financial situation.
While adjustable-rate mortgages and variable rate home loans might boast a lower interest rate right now, this could change after the introductory period is over. Knowing this, Hal M. Bundrick, a contributor to NerdWallet, recommends that you consider how long you’ll be staying in that home. If you plan to leave after around five years, going with an ARM might be better so you can save interest and then sell the home before the interest rate changes. Otherwise, you may need to consider how much risk you’re willing to take on with an ARM or if you’d rather know exactly what you’re getting yourself into with a fixed-rate mortgage.
How To Balance Present Costs With Future Costs
What can be most challenging when weighing all of the financial options for buying a new house is how to balance your present costs with your future costs.
For example, the Consumer Financial Protection Bureau shares that you need to think about more than just your monthly payment, or what you’re having to pay right now. To get yourself in the best financial spot down the road, sacrificing a little right now might be worth it.
If you’re trying to pick the right home loan option, consider using the tips mentioned above to help you look at your financial situation from all angles before deciding.