Which Mortgage Is Right for You?
In order to fulfill the goal of owning a home, for many that will mean applying for a mortgage. With the right loan, you'll be able to pay for your home over a longer period of time with manageable monthly payments that fit into your budget.
But how do you know which mortgage is right? With many different kinds available — including fixed- and adjustable-rate loans — first-time buyers, in particular, may feel overwhelmed.
If this sounds familiar, consider taking the time to speak to a knowledgeable mortgage loan officer who can help you pick the product that's right for you.
Finding the Right Mortgage Loan
KeyBank Mortgage Loan Officer John Whiting advises home buyers to start by speaking with a mortgage professional about their overall financial goals. Aside from having a place to call your own, homeownership offers the opportunity to make a significant investment that will build equity and assets long-term. A mortgage loan officer is familiar with the many different mortgage programs available and can review your financial background to recommend the best product that meets your needs.
Low Down Payment Options
Many potential home buyers believe that they need a significant down payment to qualify for a mortgage loan. But, according to Whiting, there are many ways to work with someone who doesn't have a large down payment. Certain mortgages — like an FHA Loan, VA Loan, or KeyBank's exclusive Key Community Mortgage® — allow you to purchase a home for less than the 5 percent required for a conventional mortgage.
Your mortgage loan officer can also suggest ways to increase your down payment amount. An automatic savings plan is one way to build it over a set period of time. Some mortgage programs allow for gifts from relatives can be included in your down payment along with income-based grant programs for home buyers.
How the Pre-qualification Process Helps
A pre-qualification can strengthen your position as a home buyer when you do make an offer on a house. Sitting down with a mortgage loan officer before you begin house hunting will help narrow your search into a set price range. Whiting recommends that his clients "have a budget in mind" before speaking with a loan officer. You may be pleasantly surprised by the amount you qualify for, but you might not want to spend the maximum value of your pre-qualification on your monthly housing payment. To provide the clearest financial picture to your loan officer, list all sources of income as well as the current monthly bills you'll need to pay. You should also be prepared to talk about your assets, including bank balances and your 401(k) plan balance.
So Which Mortgage Product Is Right for You?
Whiting believes that for many home buyers, a fixed-rate mortgage is the best option. Interest rates are still historically low and the stability of fixed-rate mortgage payments work best for those planning to build equity over longer periods of time. Alternatively, adjustable-rate mortgages may be a better option for those who plan to move in the near future or don't expect to pay off the loan over a longer term.
If you're ready to start the home search process, talking to a mortgage expert can ease your concerns about the approval process. A mortgage loan officer can help you make the steps necessary to buy a home, even if you don't have a large down payment or a very high credit score.