A Real Estate Investment is Rewarding: Tips on How to Choose the Best Mortgage

Begin by asking yourself the amount of money you can afford. After you have taken into account your credit score, debts, monthly bills, and income, you can then make a decision on the terms of your loan. Three major mortgage decisions you can consider:

Conventional or Government-backed Mortgage

Mortgages are divided into two main categories: conventional loans that are guaranteed by private real estate investment lenders or banking institutions, and government insured loans. A government insured loan can be in one of the following forms:

VA loans: These are loans that are backed by the Department of Veterans Affairs, and it offers buyers with low and sometimes no down payment options.

FHA loans: These loans are backed by the Federal Housing Administration, and they are an option for most people because they make the home-buying process more affordable. First-time homebuyers only need a 3.5% loan down payment.

USDA loans: These mortgages are insured by the U.S. Department of Agriculture, and they are meant to fund rural real estate investment buyers who meet the required income.

Fixed or Adjustable Interest Rate Type of Loans

If you decide to get this loan, you’ll have to make a decision on whether to choose between a fixed or an adjustable interest rate loan. The interest rates on fixed-rate loans never change. In case you’re fully settled in your career, want to set down some roots, and have a growing family, then a 15 or a 30-year fixed-rate mortgage may be what you need.

On the other hand, adjustable-rate mortgages have rates that fluctuate at certain levels. They begin with low mortgage interest rates but after the initial term, the monthly interest rates can either increase or decrease.

Conforming or Non-conforming Loans

Your lender can tell the level of your financial risk depending on the amount you borrow for real estate investment. Real estate investment loans are either conforming or non-conforming. Conforming mortgages require that you meet the set guidelines by Fannie Mae and Freddie Mac. Non-conforming loans or jumbo loans, on the other hand, are loan amounts higher than the set conforming loan limits