Financing a Home in 2022

It’s time to purchase your first home. You know the style you want, the number of bedrooms, and even how you plan to decorate it. The missing piece of the puzzle is how you will pay for it. Understanding the three primary components that go into a mortgage can help you make an educated choice in deciding which option is best for you.

Loan Term

The term is how long you will have to repay the loan. Terms are usually 15 or 30 years. A 15-year term typically means you will have a lower interest rate and lower total cost to repay. However, your monthly payments will be higher. In contrast, for a 30-year term, you will have to pay a higher interest rate, and higher total costs, but each monthly payment will be lower since you have a longer time to repay the loan. You will need to decide which is more important: a lower mortgage payment each month and higher total costs, or a higher monthly payment but lower total cost.

Interest Rate Type

The two interest rate options are fixed rate or adjustable rate (ARM). A fixed rate means that the interest rate stays the same for the life of the loan. An ARM means that the rate is fixed for the first few years, and then can go up or down based on the market. ARMs are usually preceded by two numbers. For example, you might see “5/1 ARM”. The first number represents the number of years that the interest rate is fixed and the second represents how often the interest rate will change after the fixed period ends. So, a 5/1 ARM means that the rate is fixed for the first five years and then will fluctuate each year after that. The benefit of a fixed rate mortgage is that they are more predictable. In contrast, ARMs offer lower introductory interest rates, but can be very unpredictable during the fluctuation period.

Loan Type

Two of the most popular types of loans are conventional loans and FHA loans. Most home buyers have a conventional loan. This type of loan requires that you meet certain thresholds with your credit score, down payment size, source of funds for the down payment, as well as other criteria. A second popular option is an FHA loan. This is similar to a conventional loan but is available to home buyers with lower credit scores and lower down payments. FHA loans are backed by the government and require that you purchase mortgage insurance. Your Choice Mortgage Group loan originator will review the details of your financial situation and advise you on which loan type is best suited for you.

Evaluating home financing options doesn’t have to be a daunting task. When you meet with your Choice Mortgage Group loan originator, they will walk you through all of your options and explain the pros and cons to each, so you can feel confident that you are selecting the best possible option for your family.

Since 1995, Choice Mortgage Group has been providing homeowners with the best real estate financing programs available. As a licensed lender, we offer a wide variety of services and programs that satisfy the unique needs of each of our clients.

Specializing in residential mortgage lending for over 25 years, our programs include conventional and government lending, purchases, and refinances. We also offer portfolio lending for self-employed borrowers and borrowers with complicated tax situations. South Florida is where Choice Mortgage Group started, and we like to call it home. We are devoted Florida Atlantic University Owls fans and are proud to be the official mortgage lender of FAU Athletics. We also support numerous other local organizations. For more information about Choice Mortgage Group, visit www.choicemortgage.com.

Choice Mortgage Group

40 SE 5^th Street, Suite 502

Boca Raton, FL 33432

(561)709-5151

info@choicemortgage.com