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by Hunter Fisher
When it comes to buying their dream houses, people often turn to financing. But it’s not easy to look for a nice home, get a loan to buy it, then spending the next several years paying off the mortgage. Don’t get swayed into a false sense of security even when banks and moneylenders give you very low interest rates — you’ll still need to do your homework.
It is best to also shop around for the different kinds of loans available. People buy homes for different reasons and you should evaluate your own as well as your needs and preferences to make sure you choose the right housing loan.
Are you a low-income house hunter?
If you want to purchase a house but you don’t qualify for a loan because you currently have low income, then a temporary buydown may be the right loan for you. A temporary buydown is ideal for people who are cash-strapped for the moment but expect to enjoy an increase in income in the near future.
The most popular types of temporary buydowns are the 3-2-1 buydown loan and the two-to-one buydown mortgage. In a 3-2-1 buydown, the interest rate increases by one point each year for the period of three years. After that, the rate becomes fixed throughout the life of the loan. The same is the case for two-to-one buydowns except you lower the interest rates for a period of two years.
Temporary buydowns may require to you shell out a little more money than other loans at the beginning, but this small sacrifice will be enough to qualify you for the loan.
For those looking for temporary housing
Do you want to acquire a house but are not certain on permanently settling in a specific place? If yes, try having the delayed adjustable rate loan (Delayed Adjustable Rate Mortgage or Delayed ARM). This is suitable for people who are always moving from one place to another or those who are planning to sell the house after paying it off.
Delayed ARM requires you to pay fixed monthly fees longer than other type of buydowns. For instance you have a 5-1 delayed ARM, meaning, the interest rates will be constant for the first five years only. Change of interest rates will depend on economic conditions and you arrangement with the lender.
For those looking to settle down
If you’re planning to settle down somewhere for good, then a fixed-rate mortgage is best for you. Fixed-rate mortgages have interest rates that won’t change for the lifetime of the loan, meaning you’ll be paying a fixed amount every single month. Getting a fixed-rate mortgage with low interest rates is a great idea, since you won’t have to pay more even when market rates rise.
You can either get a 30 year or 15 year fixed-rate mortgage. A 30 year mortgage will afford you lower monthly payments than a 15 year-fixed, but you end up paying for more, overall, on the former.

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