BUY A HOUSE NOW OR WAIT FOR 2021 TO COME?Real estate investments are always a good idea, as property prices often tend to rise with time. If you have the money and a desire to invest, buying a house

Dated: June 6 2020
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A house is probably one of the biggest purchases you’ll ever make. And—despite what “normal” broke people might tell you—paying for one in cash is not just possible, it’s the smartest way to go.
But if you decide saving up that much money isn’t reasonable for your timeline, you’ll probably take out a mortgage. That can be a smart move, as long as you pick a home and a mortgage that sets you up for success.
Choosing a mortgage isn’t as simple as it sounds. That’s because there are many types of mortgages available and they’re made up of different components—from the interest rate to the length of the loan to the lender.
Let’s take a look at the pros and cons of the options out there, so you can make an informed decision when it comes to your mortgage.
A conventional loan is a deal between you and a lender that meets Fannie Mae’s underwriting guidelines (more on that later). An unconventional loan—like a subprime mortgage—breaks those guidelines. Unconventional loans also include government-insured programs (FHA, VA, USDA) that set their own underwriting guidelines. If the loan meets these agencies’ guidelines, they agree to buy the house if the lender forecloses on the home, so the lender won’t lose money if you don’t make payments.
Your mortgage will either be considered a conforming or non-conforming loan, depending on how much money a lender will give you. A conforming loan is one that meets the standard underwriting guidelines (the approval process) of your specific mortgage program.
For example, guidelines for unconventional loans are determined by the FHA or VA, while government-sponsored companies like Fannie Mae or Freddie Mac provide the guidelines for conventional loans.
These companies buy loans from your lender so the lender can fund more mortgages. But they’ll only buy loans that are within the size limits established by their guidelines. If your loan size exceeds their limits and doesn’t conform to their guidelines—as is the case with a jumbo loan—it’s considered a non-conforming loan.
When you choose a mortgage, one of the first things you do is determine how your interest rate is treated. You can lock the rate, make it adjustable, or do a combination of both. For example, if you get a 30-year mortgage with a 5/1 adjustable-rate mortgage, your interest rate will lock for five years, then adjust annually for the remaining 25 years.
Your mortgage term refers to the length of your loan in years. It’s an agreement with your lender on the maximum amount of time it’ll take you to pay off the loan in full. Common terms range from 15, 30, to even 50 years.
Bottom line: Opting for a 30-year (or longer) mortgage feeds into the idea that you should base major financial decisions on how much they’ll cost you per month. That’s flawed thinking. If you want to get ahead with your money, you’ve got to take the total cost into consideration. (We’ll compare costs of different mortgage options a little later.)
Article originally appears on: https://www.daveramsey.com/blog/types-of-mortgages
If you ever have any questions or want to know more, please feel free to reach out to me. It is a good idea to have someone on your side when purchasing a home. Here is my contact information, in case you misplaced it?
You can start your home search by clicking right here:
https://yamelromano.sahouses.com/
Yamel Romano, REALTOR® RE/MAX Realty Advantage
(210) 404-5590 Cell
(210) 495-5252 Office
Facebook:@YamelRomanoSanAntonioRealtor
As a RE/MAX® agent, I’m a professional, honest, and very dedicated to helping my clients find the home of their dreams. Whether you are buying or selling a home or just curious about the local mark....
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