Home Loan Strategies

There are home loans for every type of home buyer. The goal here is to match the benefits of a specific loan type with your goals for owning a home. Here are some goals and strategies to help you decide which loan program is best for you.

Goal: You plan to live in your home for many years.

Strategy: Obtain a low interest rate over a long period of time. Since you're going to be making payments for years to come, your best strategy may be a fixed rate loan and paying points to get your rate as low as possible.

Goal: You plan to sell or refinance your home in just a few years.

Strategy: Avoid points and closing costs since the difference in interest payments won't typically make up for your out-of-pocket costs at closing. You should also try for a smaller down payment and consider a fixed period ARM as a good choice for holding rates down for a set number of years.

Goal: You want to pay off your home loan by the time your children are in college.

Strategy: Shorter term loans such as a 15 year fixed rate home loan are a smart way to ensure that you will have income available for other goals later in life. An added benefit is that you will build equity faster and pay less in interest over the life of the loan when compared to a 30 year fixed rate home loan.

Goal: You want to budget for a fixed payment each month.

Strategy: A fixed rate loan has a principal and interest payment that stays the same for the entire term of the loan.

Goal: You are comfortable with periodic changes to your interest rate if it means that you can get more home now.

Strategy: Adjustable rate mortgages are a great solution for people with incomes that are going to grow and for people who will quickly refinance or be able to afford a larger payment in a few years should interest rates rise.