You have many factors to consider in your journey to home ownership.
Here are some basic considerations:
- If you can make a down payment of 20 percent, whatever mortgage you choose, you won’t have the cost of mortgage insurance added to your monthly payment. Many buyers can’t come up with the large down payment, but mortgage insurance is only charged by mortgage companies until equity reaches 20 percent.
- Many conventional mortgage lenders ask for 5 percent to 10 percent down.
- What is your credit score? To qualify for a conventional mortgage, you need a score of 620 to 640 or higher. But if your score is at least 580, you can still quality for an FHA mortgage.
- The big advantage of an FHA mortgage is its low down payment requirement, just 3.5 percent. They account for 30 percent of all mortgages today. But if you have to move in very soon, beware, it takes a longer time to get one.
- If you have a credit score lower than 580, you still might be able to get an FHA loan with 10 percent down.
- How long will you stay in the house? If that might be for just a few years, an adjustable rate mortgage might be a good choice. Consider it if you are in the military, your job requires you to move every few years, or if this is just a “starter house” for you.
If you plan to live in the home for a lifetime, a 30-year fixed rate, or a 20-year fixed rate, would be better. Or, if you can afford the higher payments on a 15-year fixed rate mortgage, you’ll get the best interest rates of all.
- The VA loan is for service members or (this is important), for former service members.