If you were a mortgage loan, what kind of animal would you be?

Short of simply paying CASH, the most common way of purchasing a home is to take out a mortgage.  That sounds so simple, but the truth is, there are many different kinds of mortgages, many loan packages that offer a variety of options and most average mortgage consumers don’t have even the most basic of information for making informed comparisons about the best way forward in making what is tantamount to the MOST EXPENSIVE PURCHASE THEY WILL EVER MAKE IN THEIR LIFETIME.

Over the next several articles on this blog we will be exploring the types, styles and options to introduce our real estate audience to some common and some not so common choices.

Comparing the benefits and the drawbacks of the variety of loan packages is a must, but you also need to know how to apply those comparisons to your personal situation.  Armed with that information, you are truly ready to make this momentous decision.

Here are just a few select samples of questions you should be asking a lender to help you get started:

1. With the credit score I have, what are my best options for:
   • the least money up front?
   • the lowest monthly payments?
   • the lowest cost to me over the life of the loan?
2. With the amount of available money I have for a down payment and closing costs, which type of loan gives me the greatest purchasing power?
3. If I sell in 5-7 years, as statistics show the average homeowner usually does, how will the choice of loan type I make today affect my financial picture?

Unless you will be using VA benefits (specifically for active and non-active military) to finance your home purchase, the two basic loan types available to you are FHA, a Federal Housing Administration loan that offers more moderate debt to income ratios or a conventional loan.

Conventional loan packages are quite varied, offering everything from zero down options, which can carry other costs such as PMI (Personal Mortgage Insurance) that you should take into consideration, to 20% down loans at very attractive interest rates.

With an FHA loan, be aware that the home you choose to purchase may have to meet certain federal guidelines in terms of repairs and overall condition of the home.  On the plus side, lower down payment requirements may be the advantage you need.

If you are planning on buying a home soon, your local marketing specialist can help put your mind at ease about the process.