Below are some loan reccommendations for different financial goals.
Goal: Low Down Payment
Recommended Loan
You want a small down payment
Consider a FHA or 3% down Conventional Mortgage. 100% of the money needed to close can be gifted with a FHA Mortgage program.
You want a small down payment and have past credit problems that have been remedied
Choose a FHA Mortgage with as little as 3% required for down payment and closing costs. 100% of the money needed to close can be a gift from a family member or a close friend.
Goal: Payment Stability
Recommended Loan
Lowest interest rate that stays the same
A 15 year Fixed Rate Mortgage provides the lowest interest rate of the Fixed Rate Mortgages.
Want a fixed monthly mortgage payment
A Fixed Rate Loan provides monthly principal and interest payments that remain the same for the life of the loan.
Goal: Length of Stay in House
Recommended Loan
Plan to move or refinance in a few years and want the security of a fixed interest rate during that time
A Fixed Term Adjustable Rate Mortgage (3/1 or 5/1) provides a significant savings over a fixed rate mortgage. Also, avoid paying origination or discount points as the difference in interest payments will not likely re-coup your up front costs of such fees at closing.
Plan to reside in the home for 10 years or more
Select a Fixed Rate Mortgage with as short an amortization term as possible. A 15 year Fixed Rate Mortgage will cost less than half of a 30 year Fixed Rate Mortgage in interest. Consider paying points up front to buydown your interest rate. You will likely re-coup this expense in interest savings over the life of the loan.
Goal: Avoiding PMI
Recommended Loan
Want to avoid paying private mortgage insurance and put down less than 20%
Choose a Combination/Piggyback Mortgage to avoid paying PMI when putting down less than 20%. It also provides tax advantages when compared to loans with PMI.
Want to avoid paying mortgage insurance, put less than 20% down, and have only one mortgage
The Self-Insured Fixed Rate Mortgage offsets the cost of traditional mortgage insurance with a slightly higher interest rate, which provides the opportunity for a tax deduction. Traditional mortgage insurance is not tax deductible.
Goal: Increase Portfolio
Recommended Loan
Want to keep my monthly payment to a minimum to invest more money in my portfolio
Opt for an Interest Only Adjustable Rate Mortgage or Fixed Term Adjustable Rate Mortgage. The ARM provides the lowest starting interest rate and, hence, lowest initial monthly payment. Interest Only Loans do not have any principal repayment so the savings can be invested.
Do not want to liquidate any of my portfolio for down payment thereby incurring capital gains taxes and losing potential income my investments might have earned
Choose an Asset Pledged Mortgage. Pledge part of your investments in lieu of a down payment. Your investments continue to grow and you avoid capital gains taxes on assets your otherwise would have liquidated to cover the down payment and resulting gains taxes.
