It seems like there are hundreds of mortgage options out there — how do you choose which loan is best for you? We have the resources you need to make the best decisions. Choose a topic below to learn more or call us at 919-891-3612.
"Cynthia and her staff were absolutely wonderful during my buying process." — Michelle
While it may seem like there are hundreds of mortgages available to Triangle home buyers, there are actually only a few basic types of mortgages. Before choosing a loan, carefully research all of your options to determine whether you're selecting the best financing option. We have outlined the essentials of each loan to help simplify this part of the home buying process.
Types of Mortgages Explained
The interest rate in a fixed-rate loan remains consistent throughout the entire life of the loan. In addition, these types of mortgages offer 10-, 15-, 20-, or 30-year terms.
- Pros: Since interest rates remain consistent, monthly payments on a fixed-rate mortgage will never change.
- Cons: If interest rates drop, you cannot take advantage of the lower rate unless you refinance your mortgage.
Also called ARMs, adjustable-rate mortgages start with a low interest rate but will vary the rate after a set amount of time. With a 3/1 ARM, for instance, the initial interest rate is low for the first three years of the loan before adjusting every one year following.
- Pros: ARMs typically offer lower fixed interest rates initially as well as rate and payment caps.
- Cons: With fluctuating interest rates come fluctuating monthly payments.
This type of mortgage is widely used by buyers who have good to excellent credit and who can make down payments of at least 10%. Rather than being guaranteed by the government, conventional loans are offered by private institutions like banks and credit unions.
- Pros: If your down payment is less than 20%, private mortgage insurance is typically lower than FHA loans and will be removed once you have paid off 80% of the principal of your mortgage.
- Cons: Because conventional loans are not backed by the federal government, lenders often require higher credit scores and lower debt-to-income ratios.
These types of loans often apply to buyers with lower credit scores, as they can offer a down payment as low as 3.5% and lower interest rates. However, FHA mortgages do also require mortgage insurance premiums, which can result in higher overall costs.
- Pros: If you are unable to make a 20% down payment and have a lower credit score, an FHA loan may help you achieve your goals of homeownership.
- Cons: FHA loans have more requirements, including use of private mortgage insurance and limits on who can and cannot occupy the property.
VA loans are available to veterans, active-duty military service members, and their spouses. These types of mortgages offer up to 100% financing, simplified loan approvals, and lower interest rates.
- Pros: VA loans don't require private mortgage insurance and allow borrowers to prepay without a penalty.
- Cons: Borrowers are charged a VA Funding Fee and cannot use a VA loan for a second home or investment property.
These types of loans are available to people searching for homes in rural or low-density areas. They also offer up to 100% financing and below-market interest rates. Several areas in the Triangle qualify for this type of financing.
- Pros: A USDA loan doesn't require a down payment, does not limit the lot size of your home, and does not have a prepayment penalty.
- Cons: Buyers must purchase a single-family home in a qualifying rural area. Private mortgage insurance is also required.
The biggest question that we hear from home buyers in the Triangle is "How much home can I afford?" This depends on a number of factors, including your budget, any debts you may owe (such as student loans), and where you plan to purchase a home. But don't worry; we can help!
Get Preapproved for a Mortgage
Getting preapproved for a mortgage is the best way to find out how much financing a lender will give you. During this process, a lender will examine your finances and credit history closely, then he or she will discuss which mortgage options are available to you. Contact us and we can connect you with a trusted local lender.
"Cynthia is extremely knowledgable about the process of buying a home in the Wake County area. " — Happy Client
Whether you're buying your first home or your fifth, the right real estate team will give you the resources you need to make the best decisions.
Our goal is to not only help you understand your mortgage options but to be there whenever you need us. From connecting you with a trusted mortgage lender to offering advice about buying a home, we are here to help. Contact us today and let's talk about your plans.
Learn More About Cynthia Quarantello Realty Group
"Cynthia did a fabulous job on finding us the perfect home to fit our needs. We had a very limited time frame and we were living in New York while house hunting in North Carolina. " — Ryan & Erin
Contact us today to learn more about your mortgage options, the prequalification process, or the home buying process. We are here to help.