The Best Home Loan Rate for you

by : Alan Lim

Your situation

Before you begin to think about the whole process, take a look at where you are personally and financially. Don't try to fool yourself. Can you really afford to do it? They say don't put all your eggs in one basket but in this case you are, so be honest with yourself.

Kinds of loans

The very first item for consideration in what home loan rate is best is the type of loan. There are two primary loan types and variations on the theme. Each primary type will have a different home loan rate. A fixed home loan rate is just that. The home loan rate is fixed for the term of the loan. If it is a 15 year term or a 30 year term the monthly amount you pay will always remain the same. If you are looking for security in knowing what your payments will be this is the way to go. Its rate, however, is just a bit higher then the second home loan rate type.

The variable home loan rate has a lower initial interest rate. It, however, can change over time if the economy changes or the structure of the loan says the rate will change. You need to read the fine print with these loans and understand how it relates to your particular circumstances.

Which is best?

Both types of loans have there plusses and minuses. With each, the amount of money you can put down dictates a lot in what the conditions of the loan will be. Obviously, the more you can put down upfront the better conditions you can get. The biggest consideration is how long you realistically think you will be in the home. If you plan on starting a family and sticking around for a while, then a fixed rate will give you the safety you are likely looking for. It is a bit constraining though as that home loan rate will be the same regardless of what happens.

If your situation is a bit more fluid perhaps a variable rate is better. Although things do change without warning, the likelihood of a rate change in the short term is small. If you are likely to be in and out in a few years, going for a variable rate is a fairly safe bet at a lower rate. Be warned, however, if things do go south, having some cash in reserve is critical to your personal life.

Regional considerations

Interestingly, which state you live in will dictate the home loan rate options that you will receive. Some states have rates just a bit lower then others. This gives you a little latitude in some cases. If your home choice is near a city which is near a state boarder, perhaps looking at across the boarder for a home may make sense.