When you make the decision to buy a home, one of the first steps to take is applying for a loan. There are many loan options available to homebuyers that give a variety of options when paying for their home. Some groups, such as low-income families and veterans, may have additional loan options to consider. Researching ahead of time can help you prepare and make a better decision on what’s right for you when working with your lender. We have put together some important factors and loan options to consider during your first step towards buying a home.
How long do you want to make payments on your new home and when would you like to have it paid off?
What would you like your monthly payment range to be?
The answer to these questions can help you decide on what your loan term should look like. A loan term is the length of time in which it is expected for you to pay back your home loan.
The most common options for this are 30 and 15-year loans, however longer and shorter terms are also available.
The factors you need to weigh when deciding which loan term fits your plan are monthly payment (principal and interest payment), interest rate, and how much interest is paid during the entirety of your loan term. Typically a longer loan term will result in more interest being paid overtime with a lower house payment, while a shorter loan term offers less interest but higher monthly payments. However, your interest rate will also play a big part in the price of your monthly house payment and interest paid overtime.
Interest rates are not the same for all lenders, so we recommend that you explore offers for different rates to see what aligns the most with your home financing.