Choosing the Best Mortgage for You
Home loans aren’t one size fits all. Here’s a look at some common mortgage types to see which one is right for you.
| LOAN TYPE | INTEREST RATE | UNIQUE BENEFITS | MORTGAGE INSURANCE | BEST FOR |
|---|---|---|---|---|
| 30-year fixed | Fixed rate for the life of a loan | Steady, predictable payments | PMI typically required if down payment is < 20% | Those who prefer a fixed rate and a lower monthly payment than a 15-year loan |
| 15-year fixed | Fixed rate for the life of a loan | Lower interest rate & less interest paid than a 30-year loan | PMI typically required if down payment is < 20% | Those who want to pay off their loan faster & pay less interest |
| 5/1 ARM | Fixed rate for 5 years, then may change every year thereafter | Lower interest rate for a set period of time | PMI typically required if down payment is < 20% | Those who will sell before 5 years, or are comfortable with payments that can change |
| 7/1 ARM | Fixed rate for 7 years, then may change every year thereafter | Lower interest rate for a set period of time | PMI typically required if down payment is < 20% | Those who will sell before 7 years, or are comfortable with payments that can change |
| VA loan | Can be fixed or adjustable | $0 down (in most cases), no PMI, competitive interest rates | Not required; but a VA funding fee is required | Qualifying veterans or active service members |
| FHA loan | Can be fixed or adjustable | Down payments as little as 3.5% and less strict credit score requirements | Upfront and monthly MIP is required | Those with a lower credit score or down payment |
| Jumbo loan | Can be fixed or adjustable | Loan amounts that exceed the conforming loan limits | PMI requirements vary by lender | Those buying a home that exceeds $453,100 (or higher in some markets) |
CONTRACT FOR DEED FINANCING
All CONTRACT FOR DEEDS are different the sellers dicatate what they would like for terms.
Here is an example for a Minnesota contract for deed sale.
- Down Payment -usually 10% down of the sale price of the house to do a cd.
- Rates- They can be all over the board but typically 1 percent above prime rate. 6-7%
- Length of the contract is different from a standard 30 year mortgage the contracts usually only go for 3-5 years on average.
How to Find the Best Mortgage/Contract for deed Rates
Mortgage rates can change daily, and can vary widely depending on the borrower’s personal situation. Contract for deed rates can change daily also but typically the rates are 6-7% on average. The difference can mean tens of thousands of dollars over the life of the loan. Here are some tactics to help you find the best mortgage rate for your new home loan.
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Shop Around
You may be tempted to just use the lender who your real estate agent typically works with, but that doesn’t guarantee you’ll get the best rate for your home loan. It’s best to compare official Loan Estimates from at least 3 different lenders to make sure you’re getting a competitive interest rate.
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Compare Fees
The mortgage rate isn’t the only factor when it comes to the cost of your home loan. Be sure to look at each lender’s fees and closing costs to fully assess the cost of the loan. When you apply for a loan, your lender will give you a form called a Loan Estimate that makes it easier to compare the total cost of the loan, including fees.
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Increase Your Down Payment
Did you know that your down payment amount can have an impact on your mortgage rate? That’s because mortgage rates are generally tiered, and typically lower mortgage rates are available for those with a down payment of 20% or more. If possible, consider increasing your down payment to see if it’ll get you a lower rate for your home loan.
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Improve Your Credit Score
Your credit score is one of the biggest factors that affects the mortgage rate that you’ll be offered by lenders. Generally, the higher your credit score, the lower the interest rate for your home loan. Before applying for a mortgage, it’s best to review your credit score and get it in the best shape possible. I recommend using creditkarma.com They offer free credit reports and help how to raise your scores and clean up your credit. Don’t get alot of credit cards before you want to purchase a home it will lower your scores.
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Consider Your Loan Program
The 30-year fixed loan is by far the most common loan program, but adjustable rate mortgage (ARM) and 15-year fixed loans offer lower rates. If you’re ok with the higher monthly payment of the 15-year fixed loan or the possibility of your rate changing with the ARM, one of these loan programs could help you pay much less interest over time for your home loan.
