Are you in the process of buying a house? Are you in the beginning stages of house hunting? Now is the time to know your financing options. Exactly what type of home loans are out there for you? What home loan option would be best for you? Finding the right home loan for you can be a bit overwhelming especially if you are not equipped with the right information. Knowing what types of home loans are available is very important when you are choosing a mortgage lender. Depending on what type of loan you are applying for may require you to work with a certain lender based on the type of loan you are applying for. For example, an FHA loan with down payment assistance attached will require you to work with a lender that has been approved by your local government. So, what exactly are your loan options? Here is a list of the most popular home loans that are currently available:
Fixed-Rate Mortgages – A Fixed Rate Mortgage is the most common type of conventional home loans on the market. The fixed-rate mortgage is a lower risk home loan with no surprises, but you will also be paying a higher interest rate. The rates for this home loan do not change or fluctuate. Your monthly principal and interest payment will stay the same throughout the term of the loan. There is one thing to note, if you have an escrow account attached to this loan to pay your property taxes, homeowner’s insurance, or your mortgage insurance, your total monthly payment can change if the rates change on any of these items.
Adjustable-Rate Mortgage – On an Adjustable-Rate Mortgage you will find that the interest rates are typically lower than the Fixed Rate Mortgage, but that only lasts for a specific time. The adjustable-rate mortgage begins with an interest rate that doesn't change for five years and then starts adjusting the rate each year thereafter.
FHA Loan – An FHA Loan is a loan that is insured by the government. An FHA loan lets you make a low down payment, but you’ll have to secure mortgage insurance which increases the amount of your monthly payments. An FHA loan is a fixed-rate mortgage, FHA Loans allows for a down payment as low as 3.5 percent and doesn’t require you to have perfect credit to qualify. Keep in mind that because the FHA loan is government regulated that based on the county you live in, there will be a set maximum loan amount that you can receive. An FHA loan is a great loan for first time home buyers. VA Loan – A VA Loan or Veterans Affairs loan is only for those who have served in the United States Military. A VA Loan is such a great loan because you can receive 100% financing with no down payment and mortgage insurance is not a requirement. Keep in mind that with a VA loan, the property you are purchasing must be your primary residence and you are not able to purchase a “fixer-upper”. There is a strict requirement on the type of home that you can purchase with this type of loan due to this loan being a government loan.
USDA Loan – The United States Department of Agriculture (USDA) allows rural residents who may have a low income and can’t find financing elsewhere to secure a home loan if they meet specific income requirements. The Rural Housing Service (RHS) manages the USDA loan process.
As you can see, there are many different types of home loans that are available. Now it is just time to find the right home loan for you and your situation. Be sure to do your research and reach out to a mortgage lender for help in finding the best home loan.
