How do I choose the best home loan?
Have you ever asked yourself, “What type of home loan is best for me?” or “How do I choose the best home loan for my future goals?” If so, we’re glad you’re asking such an important question(s). Just by having asked this, we know you understand that a home mortgage can be an integral part of your overall financial well-being. A mortgage can be used as a tool to help meet long and short-term goals beyond the financing of the house. However, the “best” home loan is as unique as the individual and their goals.
Every loan program has it’s own features and drawbacks, making the “best” loan that much more difficult to find. Because of the various features, step one is to figure out the answers to these questions, so you know where you’re headed.
- What’s important about buying/financing this house?
- How long do I plan on living in this house?
- How much am I comfortable spending each month?
- How much do I want to pay out of pocket at closing?
- Do I plan on paying off sooner than 30 years?
These are all important components to choose the “best home loan”.
Let’s look at an example of Bill and Suzy Buyer when they decided it was time to buy a new house to accommodate their growing family. The house would be bigger, the schools would be better, and unfortunately, the house prices are higher. The house they are selling doesn’t have much equity but they have saved for a 20% down payment, however would be much more comfortable with 5-10% down. They wondered, “Can I get a loan with 3% down?”
They both have great jobs with 401ks but have started to realize that they need to be savings more each month for retirement and also need to start saving to send Junior to college. “Will I be able to afford this house and still meet our savings and retirement goals?” These are all valid concerns and questions — all parts of creating a plan so the Buyer family can choose the “best home loan” for their needs and goals.
In an effort to choose the “best home loan”, the Buyer’s were presented with an outline and analysis of their various loan options. Ranging from 20% down to as little as 3% down, each scenario showed the Buyer’s how their home loan could be integrated into their budget, savings, and retirement goals.
Here is a link to the report that was created, and can available for you: Bill and Suzy Buyer Mortgage Options Report
When reviewing their options, the Buyer family noticed that putting 20% down would eliminate nearly all of their savings and leave the lowest monthly payment. However, the 3% down would carry the highest payment, yet allow a substantial amount to remain in savings and retirement.
The Buyer family decided that their best home loan was to put 5% down to keep their savings intact and focus on their number 1 financial goal of retirement. As retirement goals are met, they can use the additional cash flow to save for Junior’s college or pay down the mortgage faster.
