Things to consider before choosing a mortgage plan

Investing in a house is the largest investment that an individual may make in his/her lifetime, which is why certain precautions must be taken and a decision must be made accordingly. In today’s economy, only a handful of people are capable of purchasing real estate in Panama with an all-cash deal. The remainder must take advantage of mortgage plans to secure enough funds necessary to purchase the property. Banks and other financial institutes provide a variety of mortgage plans to their customers. The mortgage plans highly depend on your credit score; so if you are planning on investing in a house, then start boasting your credit score. In short, the type of loan that you are going to get highly depends on your income, monthly expenditure, credit score and inventory of your debts.

Based on the above items, the financial institutions will provide you with available options. Your objective as an individual is to determine the best plan that you can easily manage without crippling your financial future. The three main things to focus on in a mortgage loan are;

1. Mortgage type: Government-backed or conventional

Two types of mortgage loans are provided to individuals that want to invest in real estate. One is a government-backed loan that is provided by government banks and departments whereas the latter one is a conventional loan that is provided by the private companies and private financial institutes. One thing to look out for, is that both types of loans are catered for and qualify for a select demographic, whether it be based on your income or other financial factors. Generally speaking, the two types of loans also come with varying interest rates or obligations.

2. Interest rate: Fixed or adjustable

The interest rate on fixed loans does not change whereas an adjustable interest rate can vary during the period of the loan after specific intervals. A fixed rate may be better suited for individuals who wish to secure and lock in a pre-determined interest rate to shield themselves from a future hikes in interest rates. Additionally, this helps normalize monthly payments to a fixed dollar amount throughout the term of the loan.

3. Loan size: Conforming or non-conforming

Conforming loans are those that fall in the limit guidelines decided by the government for a specific area whereas non-conforming loans are higher than the fixed limit and thus they have a higher interest rate to protect the lenders as they are riskier than conforming loans. If your goal is to pay a lower interest rate and/or have less liability, you may consider the idea of using as much cash as possible towards making this purchase