First-time homeowners in Pennsylvania are often faced with the dilemma of determining which mortgage option is best for them. The two main possibilities are short-term and long-term loans. Here’s a closer look at the pros and cons of the short-term option.
Homeowners with a high-paying job and a stable source of income may benefit from a short-term mortgage. This is typically a 15-year loan with higher monthly payment. On the positive side, a short-term loan can help a new homeowner build equity on their home faster. Another perk is the ability to save money by enjoying lower interest rates. This arrangement could also be preferred if a homeowner doesn’t have other significant debt obligations that may stretch their budget.
The potential problem with a short-term mortgage is that it doesn’t offer the same wiggle room as a long-term loan for homeowners. If, for instance, financial circumstances change before the loan is paid off, it may suddenly become difficult for a homeowner to continue making higher payments. With a long-term mortgage, homeowners make smaller payments over a longer period of time, although interest rates are usually higher.
There is no right or wrong answer with home loan options. The solution that’s right for a homeowner ultimately depends on factors such as whether or not quickly paying off the loan is a top priority and available financial sources. First-time, single-family homebuyers are also able to apply for government-issued FHA, VA, USDA, or bridge loans.
A real estate attorney may recommend that a first-time Pennsylvania homebuyer consults with a financial advisor to get a better idea of their available resources before making a decision. If a homeowner decides to proceed with a short-term loan, a real estate lawyer can look over loan documents to ensure terms are conditions are clear and fair based on a home’s appraised value and other key factors.