How to Decide If a Conventional Mortgage Loan Is Right for You
mortgage loan
A conventional mortgage loan has long been the traditional option of financing a home purchase.
However, there are more mortgage loans available today to choose from.
Give some thought to which type of home loan would work best with your life circumstances.
Simple and Convenient
Traditional mortgage loans are widely used and fairly straightforward. Borrowers submit an application, have their credit checked, get approved, make a deposit, and set up a payment plan.
The interest rate tends to be generally close to the federal prime rate, although you can occasionally reduce costs by having your monthly mortgage payment automatically withdrawn from your checking account balance.
Sometimes having several types of accounts with a lender can get you a better mortgage rate as well.
Mortgage loans can be scheduled for thirty-plus years, but most home loans are set up between ten and thirty years, with the option to pay off the balance earlier if possible.
Some lenders add a pre-penalty fee to the payoff balance.
Few Challenges or Opportunities
Your interest rate and monthly payment remain the same, so you don’t have to be concerned about any changes to your budgeted payment.
Assuming you have a fixed interest rate, that will remain stable as well. While financial security in that respect is welcome, you miss out on opportunities for a lower interest rate for at least part of the loan.
Your income will be tied to the same mortgage payment for decades, most likely. However, you can pay extra on the principal of your loan balance without penalty in many loans of this type. Find out in advance for sure.
Property Value Increases
As you continue to pay down your mortgage loan, the value of your property may increase based on your location and the home’s condition.
Eventually, you may become eligible for a home equity line of credit that may offer a lower interest rate than many credit cards.
If you decide to sell your home before paying off the mortgage loan, you may earn more income for the property than what you have paid into it.
Other Mortgage Loan Options
If your income level is expected to change over the next few years, for example, after graduating college and hopefully getting a career position, you may be interested in an Adjustable Rate Mortgage (ARM).
Starting with a low interest rate, mortgage payments are smaller for the first three to five years.
When they increase, you may be financially ready to pay more on your monthly mortgage.
Discuss your mortgage needs with a lender of your choice for more information. Get the best loan available for your housing needs.
Category: Real Estate
