April 17th, 2017 4:06 AM by Jackie A. Graves, President
house you can afford is based on three factors:
Interest rates; and
So before you start shopping,
it's really important to figure out your budget and what you can comfortably
afford. Check out Freddie Mac's calculator that helps you get a handle on how much you can borrow. Also,
remember that pre–approval letter we previously talked about?
That'll be useful in helping you understand what you can afford.
One important factor in your budget calculations is the length of your loan. Do you want to
pay back the money that you borrow over 15 years or 30 years? In general, the
longer your loan term, the smaller your monthly payments.
Another important factor to consider is the type of mortgage loan
you want. The interest rate on fixed–rate mortgages will stay the same through
the life of your loan as will your monthly payment. A fixed–rate loan tends to have a higher interest rate
because the lender isn't protected against a rise in its costs.
The interest rate on an adjustable–rate mortgage (ARM) may re–set every one, three or
five years based on the movement of a specific index. Homebuyers may have low
interest rates when they first take out their mortgage loans, but the rates may
increase over the loan term. If your rate changes at a reset, then your monthly
payment will change too.
homebuyer who expects interest rates to increase or welcomes the stability of
their monthly payments for the life of the loan should probably choose a
fixed–rate mortgage, while a buyer who thinks interest rates will stay the same
or decrease may consider an ARM.
interesting thing about homebuying though is that it isn't a one–size–fits–all
process. It's about whatever works for YOU. After all, it's your budget and
these are your housing needs. Doing your homework to figure out what those
needs are is the critical part — and we're happy to help!
Continue following the Spring
Homebuying Season Blog Series and visit My Home for the full run down on all things
Courtesy of Freddie Mac - To view the original article click here