You’ll have lots of choices when it’s time to buy and finance your first home. You’ll need to decide where you want to live, how much you’d like to pay and what type of loan program is best for you. The most popular loan program for first time home buyers in Texas isn’t restricted to first timers yet the very nature of the mortgage makes it so. FHA loans require little down, carry a government backed guarantee and have some very attractive interest rates. But what’s the best loan term, a 30 year or a 15 year fixed rate loan?
You’ll notice I didn’t mention anything about adjustable rate mortgages. That’s because fixed rates have been so low for so long it doesn’t make sense to finance a property with an adjustable rate but time to lock in a permanent one. The 30 year fixed FHA loan is the longest terms offered and will have the lowest monthly payment yet you’ll pay more in interest over the loan term. The 15 year FHA loan will have a lower rate and you’ll pay less interest over the long haul but the payments are much higher. So high that many first time home buyers can’t qualify for the home they want due to the higher payments. How high?
For a $200,000 30 year loan at 3.5%, the principal and interest payment is $898 and a 15 year rate at 3.25% is $1,405. That’s a difference of more than $500 each month. While borrowers may want to pay less interest over time the payments are simply too much. But we have a solution. We offer FHA loan terms of 20 and 25 years in addition to the 15 and 30 year fare. If you want to pay the least amount of interest possible with a payment you feel comfortable with, give us a call. Let’s prepare a custom FHA loan just for you.