Are you looking for a house to buy? Realize your dream of having a home through a house mortgage loan that suits best. Some people think that there is only one type of house loan. However, if you do your homework well, you would discover that there are several types, and anyone of them might be the best fit for you.
Below are the six types of home mortgage loans and their description. Use them to help you find the best one for you.
The fixed-rate loan uses the same interest rate and monthly payment throughout the loan. As a result, the borrower knows in advance the amount that he must pay every month, including the interest. Payment due remains the same regardless of the changes in the bank rates, which the lender uses as the basis for computing the loan interest.
People who look forward to spending a big part of their life in their home will benefit from a fixed-rate loan. Because you will have the same payment to make every month, you will be able to set aside the money you need in advance.
With this type of home mortgage loan, you will enjoy a low-interest rate in the first five or ten years of the loan term. However, once you have paid for five or ten years, an adjustment is made to the interest rate, which makes it higher than the previous price. One advantage of getting an adjustable-rate mortgage is that when the bank rates change, so does the interest. When bank rates go down, you will most likely pay less as well.
This type of loan is ideal for people who have a low credit rating and may have to pay high-interest rates for a fixed-rate mortgage. The adjustable-rate might result in low monthly payments, making it easy for you to own a home.
Federal Housing Administration Loan (FHA)
One advantage of buying a house through an FHA loan or government-backed loan is the low down payment. Instead of shelling out 20% of the amount to be financed, you must deposit of as low as 3.5%.
An FHA loan suits best a house buyer that does not have enough cash for the deposit. However, there are several conditions for the house buyer. First, the maximum loan is only $417,000, which means that it would only be enough for a modest house. FHA mortgage loans are not flexible. It has a fixed interest rate payable within 15 to 30 years. Borrowers must pay mortgage insurance of 1% of the total cost, which you can pay in full immediately or on a staggered basis during the life of the loan.
The VA loan or Veterans Affairs Loan is available to homebuyers who have served in the US military. Borrowers do not have to pay a deposit and mortgage insurance, which makes it better than taking a conventional home mortgage loan.
To qualify for this home mortgage loan, the applicant must have served in the US military for three consecutive months during a war or six straight months during peacetime. People who have been reserves for six successive years may also apply for a house mortgage loan.
Because it is a government-backed loan, the VA requires the borrower to buy a house that is his permanent home and with the minimum requirement for a property.
The USDA Rural Development loan is another home mortgage loan that the government offers to residents of rural areas. You will get 100% financing, which means that you do not have to worry about the down payment. It also comes with a reduced interest rate.
Assistance intended for people living in rural areas, the loan aims to make homeownership accessible and at affordable mortgage rates. However, home buyers have to meet some requirements. First, the mortgage amount must not be more than your income by 41% at most. Second, you will need to pay for mortgage insurance.
A bridge loan is available to home buyers who still own their old home while buying a new one. The financing company will consolidate the mortgage payments for the two properties. Once you sell the old one, you can settle the mortgage and get a new loan for the new one.
This type of home mortgage loan is best for borrowers with high credit scores and whose incomes are far more than the debts. Besides, the mortgage payment for the two houses must not exceed 80% of the combined value of the two properties.
Remember that there are several types of home mortgage loans available if you know how to find them. Just do some home mortgage loan shopping to find one that is perfect for you and your needs.