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How to Select a Mortgage

How to Select a Mortgage

Whether you spend evenings and weekends browsing online real estate listings or researching mortgage refinance options, finding the best fit for your individual needs is crucial but isn't always easy. Fortunately, down payment requirements, repayment terms, and interest rates vary by loan type, so there's a good chance you'll find a loan that matches your financial goals.

Here's what you should know about five of the most popular mortgages offered in Vermont.

1. Fixed-Rate Mortgages

Fixed-rate mortgages have an interest rate that remains the same for the life of the loan. It's commonly available with 15- or 30-year repayment terms. While the payment remains the same, it's possible to pay more than required each month to pay off the mortgage sooner.

A fixed-rate mortgage might be a good fit for your finances if you:

  • Prefer predictable monthly payments
  • Are ready to take advantage of historically low home loan interest rates

2. Adjustable-Rate Mortgages

Adjustable-rate mortgages, also known as "ARMs", have payments that change over the life of the loan. Most start with a fixed interest rate for a set period of time, followed by rate changes that occur at a frequency defined in the closing paperwork. Rates may change as often as every month to every 10 years.

The main benefit of an adjustable-rate over a fixed-rate mortgage is that the former is often available at a lower initial rate. Similar to fixed-rate mortgages, ARMs are available with 15- or 30-year repayment terms.

An adjustable-rate mortgage might be a good fit for your finances if you:

  • Anticipate an increase in household income after you buy the home
  • Are comfortable with the potential interest rate changes and associated mortgage payment fluctuations
  • Are ready to take advantage of historically low home loan interest rates

3. Vermont Housing Finance Agency (VHFA) Mortgages

There are five VHFA mortgage program options. Establishing your financial priorities before reviewing your options might be a good idea since each program offers a unique benefit.

For example, the VHFA Assist Down Payment and Closing Cost Assistance program is a no-cost loan designed for first-time buyers. VHFA Move offers the lowest interest rate among the five programs. The remaining programs provide other attractive options but may come with income and purchase price restrictions. There are also county residency requirements.

A VHFA mortgage may be a good fit for your finances if:

  • You are a Vermont resident
  • A federal tax break of up to $2,000 sounds exciting
  • You would like up to $5,000 in closing cost assistance

4. Veterans Administration (VA) Mortgages

Fixed-rate mortgages with 15- or 30-year terms are available to Veterans who want to purchase or refinance a primary residence. With borrowing limits up to $453,100 and 100% financing available to qualified Veterans, those with prior military service should at least consider this option.

A VA mortgage might be a good fit for your finances if you:

  • Or your spouse are active duty or veterans of the U.S. military
  • Have zero funds saved for a down payment
  • Want to avoid paying Private Mortgage Insurance

5. First-Time Buyer Mortgages

One of the biggest challenges for first-time buyers is coming up with the down payment. First-time buyer programs simplify the process by keeping down payment and closing costs as low as possible for qualified home buyers.

A First-Time Buyer mortgage might be a good fit for your finances if you:

  • Prefer to move into your new home sooner rather than later
  • Have at least 3% of the required down payment
  • Are interested in purchasing a single-family home or condominium

Find out how much mortgage you might qualify for when you use our mortgage calculator. It can provide an estimate based on the data you enter. Results assume a good credit rating.

If you need assistance with your down payment, Vermont Federal might be able to help. We offer qualified borrowers up to $7,500 toward closing and down payment costs. Ask about our Seed Money Mortgage Assistance for First-Time Home Buyers program or other home loan options when you speak with a Mortgage Originator today!

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