Buying a home allows you to build equity. Conventional fixed-rate mortgages aren’t for everyone, especially if there’s a problem with having enough money for a down payment or the credit score is lower than desired. Understanding the unique home loan options will make it easier for you to get a mortgage.
Explore the Options
The various unique options that are available aren’t new. It’s simply that lenders are making the options more readily available based on the economic trends.The two-step (or ARM) mortgage starts out with a fixed-rate mortgage but switches to an adjustable rate after five or 10 years. The term is 30 years, thus keeping the monthly principal payments lower than conventional fixed-rate mortgages.A constant amortization mortgage is also an option. The larger monthly payments are not affordable for everyone, but it does reduce the principle considerably faster.
Avoid the Bank
You might want to consider avoiding the bank, which has a number of advantages:
- Avoid your credit score being pulled
- Interest rates stay in check
- The approval process is reduced
A family loan is a perfect example of how to avoid a bank and avoid the conventional mortgage process. It’s possible to use cash on hand, the equity of a family home, or even take out a reverse mortgage so that a parent can lend money to a child for the purpose of buying a home. There simply needs to be documentation of the loan. Interest rates will also need to be charged, but the parent can decide to go below the market rates.
There are options for virtually everyone. If you don’t want to go with a traditional 30-year mortgage with a fixed rate, there are options available to you. What you choose will depend on what your individual situation is. If you have the cash flow but not the credit score, it might be advantageous to go with a unique situation where you opt to pay the principle off faster. If you don’t have a good credit score, you might want to forego the bank and explore a family loan.
In the end, explore the unique home loan options so you can become a home buyer. Discuss the options with your real estate agent or with a mortgage specialist so you know what’s best for you.
