What Type of Mortgage Should You Get?

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What type of mortgage should you get? In our last post that discussed if you need a higher credit score to buy a home, we introduced a few different types of home mortgage loans. We’ll use this post to go into a bit more detail on your options. 

Should You Get a 30 Year Mortgage?

The first thing to think about is the length of your mortgage. Do you want to stretch out the payments for 30 years, leading to the lowest monthly payments? This is the most common length selected, and for good reason. The extra money saved by having a lower monthly payment can go into other things:

  • Investing for retirement
  • Paying off high-interest debt
  • Saving for your children’s college expenses
  • Building a business
  • Just enjoying yourself

That said, a 30-year mortgage isn’t for everyone. If you’re 45 years old, taking out a 30-year mortgage means you won’t be done paying it until you’re 75. You may not want that kind of financial burden on your plate when you’re that age. 

That’s why some people choose to take a shorter mortgage, such as 15 years. For one thing, these (usually) have lower interest rates. But more importantly, you are building equity in the home much faster. 

There are other things to consider besides selecting the length of your mortgage. 

Should You Get a Conventional Mortgage?

The most common type of mortgage is a conventional fixed-rate mortgage. Making up roughly 75% of mortgages, it’s definitely an option to consider. 

“Fixed-rate” means the interest rate won’t change with the markets. Whether the market’s interest rates go up or down, yours is locked in. That’s a good thing because it means you keep the same payment until you either refinance the home, sell it, or pay it off. 

The primary downside to conventional mortgages is something called private mortgage insurance (PMI.) It’s required if the homeowner doesn’t have a down payment of at least 20% of the home’s purchase price. This is a fee the homeowner has to pay over the course of the year that is typically 0.5% to 1% of the original mortgage balance. So, if you take out $250,000 on the home, your PMI will be between $1,250 to $2,500 per year. 

How do you get rid of PMI? You’ll need to refinance the home once you have at least 20% equity on the value of the house. 

Other Types of Home Mortgage Loans

Even though conventional loans are the most popular, you may have other options available. For example, veterans often take advantage of access to VA loans, which doesn’t require PMI. Even though there’s an upfront “VA funding fee,” over time the lack of PMI saves the veteran a lot of money.

There are other types of government-backed loans as well. For example, FHA loans are great for people who don’t have great credit or 20% of the down payment for a home. USDA mortgages help people buy homes in rural areas. 

There are even more types of mortgages, such as Adjustable-Rate Mortgages (called ARMs.) These aren’t as common as they used to be but are still around. 

Which type of home mortgage should you get? It depends on your specific situation. Give us a call at (562) 924-7884 and we’ll help you sort through your options and find the right type for you. 


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On a Conventional 30-year Fixed-rate purchase with loan amount $489,000 (at 95% LTV i.e. 5% down payment from borrower) at an interest rate of 3.375% with 0 % discount point (Annual percentage rate – 3.5918%), you will be required to make 360 equal monthly payment of $1652.67 (which includes principal and interest only, so your actual payment will be higher).