You’ve been watching the news, reading blogs and you know this is the perfect time for you to buy a piece of Santa Cruz real estate. You want to do all the right things to get the best deal, and you know one of the first steps is to line up your financing.
To help you pick a mortgage that matches your goals and financial situation, here’s an overview of three of the most popular mortgages available today.
Fixed Rate Mortgage
If you plan on keeping your new Santa Cruz real estate for more than 10 years and you don’t expect your income to change, this is probably the loan for you. Although fixed rate loans charge a bit more interest, the rate will never change. This provides financial stability and the security of knowing what your monthly mortgage payment will be. By locking in the current low interest rates, you’ll save thousands of dollars over the life of your loan.
ARM (Adjustable Rate Mortgage)
With the ARM loan, the interest rate is usually very low at the beginning but can increase over time. If you plan on keeping your Santa Cruz real estate for only a few years (up to 7) or you expect your income to increase, then this might be a better choice for you. If you expect your income to increase, an ARM loan can allow you to buy a more expensive home now. The drawback to this type of loan is that you do not know what your mortgage payment is going to be in the future; if the interest rate jumps dramatically, then so does your payment. A particularly popular ARM is the 5/1 ARM. The interest rate of a 5/1 ARM is fixed for a period of 5 years. In the 6th year, the loan becomes a typical Adjustable Rate Mortgage. So if you plan to own your home for less than 5 years, the 5/1 ARM may be your best choice.
If your credit is a bit shaky, an FHA loan may be a good fit for you. The qualifying criteria for FHA loans are not as strict as for traditional mortgages. Also, because these loans are guaranteed by the FHA, lenders often allow you to provide a smaller down payment than they would allow for other types of mortgages. If you’re in a time crunch, an FHA loan may not be right for you; processing times are typically longer than other types of loans because of the government paperwork involved.
If you have any questions about mortgages or need a referral to a lender, give me a call today at (831) 662-6522 or email me at Lauren@LaurenSpencer.com.
Please visit my website for more information at www.MySantaCruzRealEstate.com.