Getting a mortgage for your first home is probably one of the most stressful parts of the home-buying process. Mortgages can be difficult to understand, and you want to know your options since a home is a huge investment you'll be paying down for a long time. Here are some loan options to talk over with a mortgage lender when you're buying your first house.
A Fixed-Rate Mortgage With Set Payments
If you get a loan from a traditional lender, you may want to consider a fixed-rate mortgage. The benefit of this type of home loan is that the payments are set for the life of the loan. As long as you don't refinance your house, you'll know how much your payments will be in the future so you can plan your finances. You may need a large down payment for one of these loans, and you'll want to have good credit so you can qualify and get a lower interest rate.
A Variable-Rate Mortgage With Low Initial Payments
The qualification terms for a variable-rate home mortgage are usually the same as for a fixed-rate mortgage in that you'll need good credit and a down-payment. The advantage of a variable-rate mortgage is that your payments will be lower during the first phase of your mortgage. You'll want to know how long this phase is so you can decide if this mortgage is right for you. If you only plan to stay in your home for a few years before you sell, then you may be ready to move out before your payments go up. The downside of a variable-rate mortgage is that your payments could increase so much that you can't afford to make the payments. This type of mortgage is somewhat of a gamble since the rate will change along with how the economy is doing.
A Government-Backed Mortgage With Easier Terms
As a first-time homebuyer, you may find a government-backed mortgage to be the best match for your circumstances. These mortgages are often easier to qualify for and require a lower down payment. You may even find a program specifically for first-time buyers that make it easier to get in a home. A VA loan is one possibility if you qualify due to service in the military, and an FHA loan is another possible option. You can often qualify for these loans if you have new credit or when you've had credit problems in the past. The loans can be obtained through a mortgage lender like a traditional loan, the difference is that the loans are backed by the government so they're not as risky to the lender as a conventional mortgage.