Purchasing a home is likely the single largest expenditure that you will ever undertake.
And while buying a house with that white picket fence may be turning a little cliché, knowing the options for a mortgage can improve your version of the American dream. A wide range of mortgages are designed to appeal to a diverse spread of borrower needs.
While some mortgage types are more common than others, simply because a mortgage is more widely known does not make it the best solution for you. The right mortgage in the right situation may offer more friendly terms in a specific situation or it may even leave you with a little more money in your pocket.
The key is to make an informed decision about your mortgage, and you can arrive at that decision by beginning with selecting the right mortgage for you. Here are the three types of mortgages available to you at First Palmetto Bank:
- Fixed Rate Mortgages (15, 20, and 30 Year Terms)
The 30 year mortgage is the most common type of mortgage and probably the one you think about when you hear the term. Other options include the 15 and 20 year options. These fixed rate mortgages mean that you pay a flat, hence fixed, interest rate over the designated term. A 30 year mortgage means a fixed payment spread over a 360 month (30 year) period of time. A 15 year mortgage means that the fixed payment will be spread over 180 months, or 15 years.
A fixed rate mortgage locks you into an interest rate for the duration of the mortgage, which means it can start out higher than other options. However, because it is a fixed rate, you do not run the risk of an increase should rates go up in the future. There are several types of products available including government secured loans such as VA, FHA, and USDA. Your Mortgage Banker can discuss the options best suited for your needs.
- Balloon Mortgage
A balloon mortgage typically has a short term ranging from 5 to 7 years. However, the monthly payments are much lower than a traditional fixed rate mortgage and very little of the principal is repaid during the initial term. At the end of the term, the remaining balancing has to be either paid off or refinanced. This type of mortgage is used to offer a quick payoff of the balance or to potentially refinance at a later date. The lower payments are appealing if you plan to live at the current location for a short time period or expect increased income in the future.
- Construction/Permanent Loans
If your home does not yet physically exist, then a construction loan is for you. Many future homeowners would like to build the home of their dreams. And while technically not a mortgage, a construction loan paves the way to home ownership. Many banks, such as First Palmetto Bank, offer construction loans that are accompanied by permanent financing in a single closing. This means that the construction costs are disbursed as needed and will convert to a more traditional structure when the project is completed. This opens up a variety of options, including flexibility in financing options.
Now that you understand the three types of mortgages a little more clearly, head on over to the Mortgage page to meet your future Mortgage Banker. Our Mortgage Bankers build relationships above and beyond a transaction and help you find the best product to meet your housing needs. They work with you every step of the way to make the process as smooth as possible and provide the kind of guidance that will help you get ahead.