What Are the Different Mortgage Loan Options?
Deciding to purchase a home means investing in a mortgage. Before you begin to look at the homes for sale in your area, you should spend some time exploring the options for mortgage loans. The good news is you have more choices than ever. But while there are numerous ways to invest in real estate, not all of them will be meet your needs.
The Most Common Types of Mortgage Loans
Lenders will work with you to determine which type of mortgage loan is right for you and which you qualify for. You should give careful attention to a few specific types of loans because of their affordability and access.
1. Conventional Loans
Mortgage lenders set most of the terms associated with conventional loans. There is a down payment requirement, which may be as much as 20 percent of the home’s sale price. Interest rates typically range based on the market. Lenders also set the credit qualifications. Buyers can choose between a fixed rate or adjustable rate loans.
2. FHA Loans
For first-time homeowners, an FHA loan, which is backed by the Federal Housing Administration, is one of the best options. This is not a loan funded by the government, but the FHA backs your lender up to a specific limit should you default on it. As a result, this option tends to require a lower credit score. The interest rate is also lower. Down payment requirements are significantly lower than traditional loans. Many lenders offer FHA loans.
3. VA Loans
For those who have served or are serving in the U.S. Armed Forces, a VA loan, one backed by the Department of Veterans Affairs, works much like an FHA loan. However, no down payment is required. Interest rates for this loan type are also very low.
4. USDA Loans
The U.S. Department of Agricultural also offers a unique program for people buying a home in a rural area. No down payment is required to obtain this loan. Interest rates are also low, and mortgage insurance fees are minimal. There is a requirement to purchase farms, ranches or other property in a rural area that is approved by the agency.
It is essential to compare home loan options carefully with a lender you can depend on. Be sure to look for a local lender to help you qualify for a low-cost mortgage loan that helps you meet your specific financial goals.