First-Time Buyer? 3 Reasons To Select A Fixed-Rate Home Mortgage
As you prepare to become a first-time homebuyer, you already know that you will have to make several important decisions that will affect your satisfaction with both the initial purchase process and your long-term satisfaction with the house you select. One of the most important of these decisions is whether you decide to use a fixed- or adjustable-rate mortgage, commonly referred to in the industry as an ARM. In many cases, first-time homebuyers can benefit by sticking to a fixed-rate mortgage loan. Here are three reasons why.
Easier to budget when growing a career or family
One of the most important reasons for first-time homebuyers to choose a fixed-rate mortgage is to make it easier to budget during periods of career or family growth. Instead of having to adjust to periodic increases for housing, those who are focused on advancing their career or who experience a temporary drop in income due to adding a child to their family can feel more comfortable by knowing their monthly mortgage payment stays the same.
No balloon payment to worry about
Adjustable rate mortgages frequently have short terms, sometimes as short as three to five years. When this point arrives, the homeowner will be required to deal with the balloon payment, which is the amount of principal left on the loan. If their credit situation has declined, they may find themselves unable to get a new mortgage at a reasonable interest rate and end up having to accept a high interest rate or sell the home to avoid the risk of foreclosure.
Stability through economic upheavals
While the current economy appears strong and is expected to remain that way, there are many potential factors that could cause homeowners to experience the type of economic upheaval that would make it difficult to afford a sharply rising adjustable-rate mortgage interest amount.
An unexpected job loss, extended medical issues, natural disasters, and even the political climate can all create situations that could cause homeowners with an adjustable-rate mortgage to struggle financially.
However, there are a few instances when an adjustable-rate mortgage may be the best choice, even for a first-time homebuyer, such as when the home will be sold within a few short years.
To learn more about both fixed- and adjustable-rate mortgages and make the best possible decision for your situation, first-time homebuyers should sit down with a trusted banker or mortgage loan lender from a company like Pinnacle Mortgage Solutions in their area. These financial experts can offer advice based on both the borrower's situation and the current economic climate to help ensure the right option is chosen.
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