Last week we spoke about important financial costs to consider when buying a home in New Albany, and we talked briefly about mortgages.
This week we want to explore the topic of mortgages in depth, and we specifically want to focus on the different types of mortgages available for home buyers.
Fixed-Rate Mortgages
This type of loan keeps the interest rate consistent throughout the life of the loan, which may be 10, 15, 20, or 30 years. Fixed monthly mortgage payments make budgeting easier for homeowners.
Adjustable-Rate Mortgages (ARMs)
While the initial interest rates tend to be lower than fixed-rate mortgages, the interest rate fluctuates, with low rates that gradually increase each year. You can learn more about adjustable-rate mortgages in this handbook from the Consumer Financial Protection Bureau.
Federal Housing Administration (FHA) Loans
These type of loans typically only require a 5% down payment as opposed to the conventional 20%. However, FHA loans require mortgage insurance.
Veterans Administration (VA) Loans
All military veterans are eligible for this type of loan, which requires no down payment or mortgage insurance. There is a borrowing limit, however. In Licking and Franklin Counties, where New Albany is located, the borrowing limit is currently $417,000 for a one-unit property.
Two-Step Mortgages
These are 30-year loans that have a fixed rate for either 5 or 7 years before they are changed into a convertible loan (fixed-rate) or nonconvertible (adjustable-rate) loan. These loans are also known as 5/25s or 7/23s.
Balloon Mortgages
These type of loans tend to have lower interest rates, but require that you pay the entire loan in full at the end of the loan period.
Bi-Weekly Mortgage Payments
You can significantly reduce the amount of time you have a loan, and decrease the interest you have to pay, by making two mortgage payments a month.
Which Mortgage is Right for You?
The right mortgage depends on your individual needs: your monthly income, future expected income, and current debts.
If you need help choosing the best mortgage or would like to speak with a recommended lender, we can provide any information you need to help make your transaction go smoothly so you can receive the keys to your New Albany home in no time. We would be happy to talk with you at any time; just call us at 614.939.1234.