Most homeowners, need to rely on some sort of financial assistance, and / or financing, in order to be able, to secure, the home, of their dreams, and needs. Since, for many, one's house, representations, their single – largest, financial asset, it is important, to discuss, and evaluate, some of the relevant capabilities, in order to maintain all options and alternatives. Especially, with the escalating prices of most real estate, few are able, to proceed, with, an all – cash, deal, so, we will attempt, in this article, to briefly examine, discuss, and consider, using the mnemonic approach , the FUMAH options for financing one's home.
1. Friends / family: Depending on one's connections, and relationships, some home buyers, utilize the financial support, of friends, and / or family members. This may be, in order to have the necessary funds, for the down – payment, etc, required by a lender, or, at times, may be the entire funding source.
2. Usual: The most usual form of financing used, is referred to as Conventional Mortgage. This is, generally, a fixed – rate, combined with a term of the loan, of 30 – 40 years. Generally, one must put down, a down – payment, of 20%, plus certain other requirements of the lending institution. The advantage is, for the entire period of time of the loan, the homeowner knows, his monthly financial commitment, in terms of interest, and principal, repayment.
3. Modified: This form of financing, generally, is modified, in some ways, from the usual, or fixed – rate mortgages! Most often, the modification, is related to, the term of the loan, and, rather than 30 – 40 years, length, the length is shortened to 15 or 20 years. The advantage is, generally, a lower interest rate, paid, combined, with the total payments, significantly reduced. The challenge is, often, because there is a larger monthly payment, it is more difficult to qualify, for the same amount of the loan, while the advantage is, it gets paid off, more quickly!
4. Adjustable: Many use an adjustable mortgage, because, often, for the initial period (anywhere, usually, from one to 7 – 10 years), the interest rate, is lower, and, then, somewhat easier, to qualify for ! For those, expecting to stay, in a specific home, for a shorter – period of time, this may be a great solution, too! Obviously, the disadvantage is, the unpredictability of the rate, after the initial period, expires!
5. Hybrid: Some combination of the components, of the types of financing, listed above, create, what might be referred to, as a hybrid form! This may, include, some modification of the length, term, etc.
Wise Buyers understand and know, the best course of action, and alternatives / options, involved, in financing one's home. Will you prepare, and proceed, in whatever manner, best serves your personal needs, and scenario?