Some people are able to save up and purchase their home in full or with minimal financing. However, for most homebuyers in New Mexico, securing a mortgage loan is a necessary step in the home buying process.
At Del Norte Credit Union, we understand that taking on a mortgage to provide a home for yourself and your family is one of the most significant decisions you will ever make. As a result, we aim to make the loan process as easy and transparent as possible with highly experienced loan officers to assist you every step of the way.
The first thing to note is that there are various mortgage options available to you. So, to help you get off on the right foot, here is some important information you should keep in mind about home loans.
What Is a Mortgage Loan?
If you don’t have all the money saved upfront for a house, a mortgage or home loan covers the difference. Most banks offer a pre-approval process, providing the homebuyer with a general idea of the maximum loan the bank is willing to extend. When the buyer finds a qualifying home, the details of the purchase are finalized. Take a look at some of those details below.
Mortgage Loan Term: Most banks and credit unions offer a term of 15 or 30 years. These are standard offerings. There are, however, some banks which offer more flexible loan terms, such as 10, 20, or even 40 years. Keep in mind that the shorter the loan term, the higher the monthly payment, but the lower the interest rate.
Payment Schedule: The good news is that if you choose a shorter loan term and would like to reduce your payment amount, you could make bi-weekly payments. This typically works out to the same amount each month, but because the amount owed is split into payments every two weeks, you do not have to come up with a big lump sum when the mortgage payment is due.
Interest Rates: The mortgage interest rate will typically vary depending on your credit history and the current market rates. There are also two types of interest rates, known as fixed and adjustable. This creates three different types of loans for you to choose from:
- Fixed-Rate Mortgage: As the term suggests, your interest rate is fixed for the lifetime of the loan. This protects homebuyers from rate fluctuations in the market, but may also mean missing out on lower interest opportunities unless you refinance.
- Adjustable-Rate Mortgage: Because interest rates fluctuate, when homebuyers are optimistic about mortgage rate changes, they may choose an ARM, also known as a variable-rate mortgage.
- Hybrid-ARM: For some homebuyers, a hybrid option is much better. In this instance, the loan has both fixed and variable rates. Typically, it starts off with a fixed rate and then switches to the variable later on. For instance, a 5/1 Hybrid ARM will have a fixed rate for five years, and then an annual rate change every year thereafter.
What Mortgage Loan Programs are Available?
The two most common mortgage programs are FHA and Conventional loans. There are also specific home loan programs, such as VA loans for veterans, service members, and their spouses. At Del Norte Credit Union, we focus on providing conventional loans at competitive rates.
Contact Us About Your Eligibility
To get the best conventional rates, you should provide at least a 20 percent down payment. However, this is not necessary to qualify. Buyers with lower down payments may rely on private mortgage insurance (PMI) to help boost eligibility, but this may also add to cost. For more information about how to get a mortgage loan in New Mexico, contact Del Norte Credit Union today!