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Best mortgages are those of 30 years fix rate. Period!
Here are the mortgage loans I think you should look for:
- Conventional mortgages - if can put a 20% or more down payment
- FHA loans – that allow you to put you feet in the door for as little as 3.5% down payment
- VA backed
financing (if you are a veteran)
- Home Path loans (Freddie Mac / Fannie Mae loans)
I always prefer 30 years fix as my best mortgages because your monthly cash outlay will be smaller however if you to accelerate your payment you may to do so.
You initially will incur in mortgage insurance (MI) payments, however it is still a wonderful gateway into ownership
However there are exclusive for Veteran of the armed forces.
They are a small token to those who serve this country honorably: They will receive an entitlement that guarantees up to 25% of their home purchase.
Having that guarantee allows a veteran to by a home
with zero% of down payment and NO mortgage insurance required. This is unquestionably one of the best mortgages in the market ...proven that you served so you can be eligible.
Best Mortgages = 30 years Fix Rate
I like this type of mortgage because of the flexibility it offers.
First of all let me point out that in this assumption there are two components: “Time = 30 years” and “Fix Rate”
TIME = 30 years: you will have thirty years to pay your home!
FIX RATE: The marvel of it is that your monthly payments for principal and interest – which is really the payments towards paying the mortgage - will never go up.
If you were to buy a home with a 30 years fix mortgage, your first payment will be the same 30 years from now no matter what happens with the economy, price of homes or interest rates going up… 359 payments exactly the same; Isn’t that great?
But wait: 30 years still equals 360 months – why did I say 359 payments?
It is because the very last payment is very likely to be “less!” Refreshing, hum?
Note: Please keep in mind that it is customary that you will send other moneys along your mortgage payments – like home insurance and property taxes. These items will go up or down …expect that they more likely will go up.
There are other alternatives that allow you to pay your home sooner - like the 15 year fix but you have to pay more every month - however the flip side is that interest rates will be lower.
If you financially strong and/or have some cash reserves to weather any bad storm doen the road, 15 year fix may be your uncontested winner among all the best mortgages! That includes VA loans that you also can make in 15 years fix.
Mortgage Insurance (MI), is required of those who buy their homes with less than 20% down payment.
MI will be in place until such time that you have paid around 22% of the original purchase price or, in some cases the home has increased in value, then the loan-to-value (LTV) may be taken in consideration as well.
You will have to check around when you come to that bridge. Please read more about this on my page
In any ways, having a fix rate loan is a huge advantage over renting that always go up at the end of each contract no matter the circumstances of the economy or your finances.
So, if you are a first time buyer – still on the fence, this may be one item that will propel you towards ownership.
FHA loans, despite of the need for mortgage insurance, are still among the best mortgages in the market: Low down payment, relatively easy to qualify, lots of lenders and it is available to everyone.
There are many other options as far as number of years to pay your loan: 15 years is really common but as of lately 10 and 20 years pop up quiet often.
The argument is that you can accelerate your payments. And it is true. You pay more of the principal every month to compensate the shorter period you have to pay the mortgage back.
Interest rates also tend to be lower for shorter term loans.
However in a 30 years loan you can accomplish pretty much the same thing in two counts: Pay your loan in a shorter time and save on interest as well.
You can always send in additional payments whenever you have additional funds – it can be every month, every other month …twice a year …all the bonus check your received …nobody will question of when or how much extra payment you send in: The option is yours, entirely!
Of course the more money you send in, the quicker you will pay your loan off.
You save on interest as well because it is a not entirely understood fact that “interest is charged on the amount you owe, for the period you owe it.”
It comes to some important things you need to keep in mind:
So whatever amounts you pay, you do not owe interest on that portion any more.
…And the “earlier” the better
Hence the savings… Unless there is a “prepayment penalty clause.”
TIP: Make sure that – no matter the terms of your loan – you do NOT have a prepayment penalty clause. Which is to say: You can pay your loan earlier without having to pay a penalty…
This seems that it would be obvious but it is NOT. It must be spelled out on the body of the contract. Please demand it to be clearly spelled out.
Note: This is often more of an issue with car loans – so watch this clause next time you buy a new car ;-)
In summary, unless you are absolute certain of the strength of your finances and that a consistent additional cash outlay to pay a shorter term loan will not cause you to become strapped for cash down the road, then the 30 years fix is your best mortgage option.
Choose flexibility for added piece of mind. Pay more of it whenever you want and you have extra moneys.
Even if you decide to shorten the term of your loan
and pay it off early, you still can take advantage of sending in additional
amounts and pay your loan off on your own pace.
JC Fagundes, Associate Broker
EQUAL SERVICE TO ALL.
Residential. Commercial. Investments.