Types of loan programs for buying a home

You’ve found the home of your dreams and you’re ready to close escrow. Sounds easy enough, right? Before the deal is closed, you have to determine the best way to pay for it.

Choosing the right type of home loan is a critical part of the process. Here are the two most common loans in the mortgage industry:

Fixed-rate mortgage

This type of loan entails paying an interest rate that will remain fixed throughout the life of the loan. It will not go up and it will not go down. This means you’ll avoid any surprise jumps in your monthly mortgage payments. But it also means you will not get any relief or a lower payment unless you refinance entirely. And even that doesn’t guarantee a lower payment. It’s important to make sure you can afford your monthly payment before committing to this type of loan.

Adjustable-rate mortgage

The interest rates on these loans fluctuate based upon an agreed-upon terms. These loans can have a rate that’s locked in for a certain amount of time before being open to rates which change every month for the rest of the life of the loan.

Your monthly payment, more often than not, isn’t set to a certain point and will fluctuate for a predetermined amount of time at the beginning of the loan. This might be a good option if you plan to sell the home quickly or don’t plan on staying there for a long time but you’ll likely pay more interest.

Looking for more information on your home loan options? Visit our Real Estate Center.

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