Buying a home could be one of –if not the—largest purchases of your life, which means you’ll likely need to take out a mortgage. So it’s important to fully understand your mortgage and the options you have available.
How do buyers feel about mortgages?
According to a recent survey by the National Association of Realtors, 63 percent of people feel that now is a good time to buy.1 Given their current financial situation, consumers think qualifying for a mortgage will be:
- 29% very difficult
- 30% somewhat difficult
- 21% Not very difficult
- 21% Not at all difficult
What are some types of mortgages?
Fixed vs. adjustable rate
- With fixed-rate mortgage loans2 your monthly principal and interest payments will likely remain the same for the life of the loan, typically 15 or 30 years.
- An adjustable-rate mortgage (aka ARM)3 begins with a fixed interest rate, but after a period of time switches to an adjustable rate. Common terms are 3, 5, 7 and 10 years.
Conforming vs. jumbo loans4
- Conforming loans meet the underwriting guidelines of Fannie Mae and Freddie Mac.5 This means the size of the mortgage (which Fannie Mae and Freddie Mac will guarantee) is generally limited to $453,100 but can reach $726,525 in the highest-cost areas of the continental United States.
- Jumbo loans (aka nonconforming loans) exceed the conforming loan size limits. Because of this, jumbo loans are not typically backed by Fannie Mae and Freddie Mac.5
Which mortgage might work for you?
When you are shopping for a mortgage, ask yourself how long you are likely to stay in the home and have a clear picture of your finances. This can help you figure out the length of your term, what monthly payments you can afford and more.
Long-term fixed-rate mortgages2
- Benefit: Security of fixed monthly payments.
- Consider if you plan to live in your home for 10 years or more.