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Buying a house: Is it smart to use a 30-year mortgage?

On Behalf of | Aug 6, 2021 | Real Estate Transactions |

Buying a home can be an effective way to secure your financial future, while also making it easier to become part of a community. However, it’s important that you act carefully when shopping for a Pennsylvania home. Ideally, you will make a significant down payment, get a loan with a fixed rate and avoid products that have terms of more than 30 years.

How large should your down payment be?

To qualify for a traditional mortgage at a reasonable interest rate, you will need a down payment of at least 20 percent. For example, if a house costs $100,000, aim to put down $20,000 on closing day. The minimum down payment for an FHA loan is 3.5 percent. It’s important to note that you may need to add private mortgage insurance to your loan if your down payment is less than 20 percent.

What’s the advantage to paying off a mortgage early?

The longer it takes to pay down a loan balance, the more expensive that loan becomes. This is because the lender will charge interest on the outstanding balance until it is paid off. Therefore, it is generally a good idea to pay off your mortgage as quickly as possible. A real estate attorney may be able to provide more insight into why you should avoid mortgage products that have terms of more than three decades.

If you are in the market for a home, it is important to spend time doing your due diligence. Taking time to compare the various loan products that may be available to you can make it easier to find one that meets your needs and budget.