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The Right Purchase Loan
When purchasing a home, the key is
to honestly assess your
current situation and where you think you will be in the short
and long term future. These factors will help determine the proper loan for
you. Below are examples of loan options to consider when purchasing
a home.
Step 1 |
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The first step is to determine how much of a monthly payment you feel you can
comfortably afford. Take into consideration your current rent or mortgage
payment. Also take into consideration your income, and whether you expect it to
stay the same or increase considerably in the next few years. Then, consider if
the income is from a sole breadwinner or two or more working adults. Now you
need to determine if your primary objective is getting the best house now for
the lowest monthly payment. Or, if your strategy is to pay as much towards
principal as possible and build equity as fast as you can to get your house
paid off.
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| Objective
|
Possible loan
choice |
| Cheapest payment possible? |
Interest-only loan |
| Standard payment? |
30 year fixed or ARM program |
| Build equity faster?
|
15 year fixed or Bi-Weekly pmts |
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| Step 2 |
| The second step is to determine how much money you have saved for a
down payment and closing costs. You might choose to put down 5%, 10%, 20%, or
nothing at all. Or, even if you have money for a down payment, you might choose
to use it to pay off other existing debt, or save it for future needs. |
| Down
payment percentage |
Possible
loan choice |
| 0% |
80/20 piggyback loan* |
| 5%
|
80/15/5 piggyback loan* |
| 10% |
80/10/10 piggyback loan* |
| 15% |
85% loan or 80/5/15 piggyback* |
| 20% |
80% 1 loan |
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| Step 3 |
| The third step is to determine if you plan to live in your new home
for just a few years, or if this is the home you expect to stay in for many
years.
|
| Projected
years in home |
Possible
loan choice |
| 1 - 3 years |
3/1 ARM
|
| 4 - 6 years |
5/1 ARM
|
| 7 - 10 years |
7/1 ARM or 30 year fixed |
| 10+ years
|
30 or 15 year fixed |
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| *Piggyback |
The simultaneous closing of two mortgage loans. The customer will have two
mortgage payments, but will avoid PMI by choosing this alternative.
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