How to pick the perfect home loan in Washington state's housing market

When financing a home, mortgage interest rates significantly impact the overall cost of buying a home in the long term. A 1% difference in mortgage interest rate adds up to thousands of dollars over the course of 15 to 30 years.  Your interest rate is affected by many factors including credit score, down payment, and loan type. When financing your home there are different loan options to meet your needs and goals. 

Each type of mortgage is designed for a different type of borrower, so each comes with different pros and cons. Solarity offers a variety of mortgage types and terms, and we’re committed to finding one that works well for you.

Fixed rate

A fixed-rate mortgage keeps the same interest rate for the life of the loan, as opposed to an adjustable-rate mortgage in which the interest rate can fluctuate. The advantage here is that since you know that your rate is locked, budgeting for your housing payment is easy and predictable. You’re protected from sudden changes in interest rates, even if yours isn’t the lowest one on the market.

If you’re purchasing a home that you’re confident you’ll keep for a long time and you want to sleep well at night knowing your monthly mortgage payment won’t change, a fixed-rate mortgage is a great option. This is one of the most common types of residential mortgage loans.

Adjustable rate

Adjustable-rate mortgages, sometimes referred to as ARMs, have interest rates that can change to match the prevailing market rates. You might wonder why anyone would want an adjustable-rate mortgage when fixed rates are available. ARMs come with a unique advantage — during the first few years (usually three to seven), the interest rate is temporarily locked in at a lower rate than what you would see on a typical fixed-rate loan. Then, after this intro period, the rate will adjust up or down each year to match the market.

While most homeowners are better off with the security of a fixed-rate loan, adjustable-rate mortgages are a helpful tool for homeowners who are likely to move or refinance before the lock-in period is over. 


No down payment

For many working families, the down payment can be a huge barrier to homeownership. But it doesn’t have to be this way. If you have a steady income and can afford a house payment (but are a little short on cash), a no-down-payment mortgage is a great avenue to becoming a homeowner. 

No-down-payment loans require you to pay private mortgage insurance (PMI) with each payment, but this is still often cheaper than renting. Plus, you’ll be building equity as you pay off your home.

USDA

US Department of Agriculture (USDA) loans are ideal for low to moderate-income buyers that are looking for their own slice of heaven in the country, but they’re also perfect for people who are shopping for homes in rural towns (up to 35,000 people). The purpose of these loans is to boost the economy and population of agrarian and rural areas.

USDA loans are attractive because they can fund up to 100% of the purchase price of the property, and they require no down payment. However, your income cannot be above a certain threshold, and your future home must meet certain guidelines to qualify. 

Bridge loans

Timing the sale of your existing home with the purchase of a new one can be exceptionally difficult, especially if you are planning to use your home equity as part of the down payment. This is when a bridge loan comes in handy.

Bridge loans are designed to cover the gap between the sale of one house and the purchase of another. They allow you to “forward” the equity from your old house to your new one. With a bridge loan, you can finance up to 90% of the appraised value of your property, and you make interest-only payments for up to 12 months. To make things even simpler, you can close your bridge loan at the same time as your new purchase.



Refinance

Refinancing allows you to reconfigure your loan so you can lower your payment, get a shorter term, or cash out some of your home’s equity. If you need to finance some major home repairs or pay off high-interest debts, a cash-out refinance can help you reach your goals.

Also, if current interest rates are lower than the one you have on your original mortgage, refinancing to a lower rate will potentially save you thousands of dollars in interest over the life of your loan. You can also use a refinance to change an adjustable-rate mortgage into a fixed-rate mortgage. In short, if your original mortgage isn’t ideal, you can refinance it into a loan that is.

HELOC

A home equity line of credit (HELOC) allows you to tap into your home’s equity without altering your original mortgage. If you already have a low-interest rate or are close to paying off your home, a HELOC might make more sense than refinancing. 

With a HELOC, you can borrow against your home as you need the money. In many ways, a HELOC is like a credit card that’s secured by your house. During the draw period, you can withdraw from your home’s equity and pay only on the interest. As you repay your HELOC, you free up credit to borrow again in the future, much like a credit card.

Home loans with a boost

Introducing Solarity Credit Union and the best mortgage experience you’ll ever have. We make the home loan process fast and easy. You can apply online in just a few minutes.

Rated 93 out of 100 by thousands of Solarity borrowers, our online mortgage process saves you time so you can focus on the things that really matter. And our expert Home Loan Guides are here to help every step of the way.

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