Types Of Home Loans
This article discusses the different types of home loans and their features. Fixed-rate mortgages offer stability and predictability in your monthly mortgage payment, while adjustable-rate mortgages can help those with poor credit get good rates on a home loan. Fixed-rate mortgages are the most popular type of home loans, and they offer low fixed interest rates that put home-ownership within easier reach.
Adjustable rate mortgages (ARMs) offer variable rates that can change over time, making it difficult to predict housing expenses in the long term. However, for those who can manage their finances carefully and are able to nudge an adjustable rate mortgage into a fixed-rate loan, ARMs can be a great way to help better budget housing expenses while also helping borrowers with poor credit get access to a mortgage loan.
When it comes to home loans, conventional mortgages are the most popular type. A conventional mortgage is a loan that prescribes a fixed rate for the life of the loan, allowing borrowers to keep their same interest rate and monthly payment over time. This type of loan is ideal for those who wish to keep their monthly payments constant and predict their housing costs.
FHA loans are another common type of home loan that are available for those with less-than-perfect credit or a low down payment savings. FHA loans require a lower credit score than traditional mortgages, but also come with an insurance premium. USDA loans also provide access to affordable financing and may not require a down payment at all if certain income criteria are met.
Home buyers may be able to borrow how much money they need based on their income and other criteria. Conventional mortgages, which are not backed by the government, may require a down payment of at least 5% of the home’s value.
Federal Housing Administration (FHA) loans are often a popular choice for home buyers because they require lower down payments and have more flexible credit requirements than conventional loans. These loans also make mortgage insurance premiums more affordable.
An annual mortgage insurance premium of 1.75% is required, as well as an upfront mortgage insurance premium funded at closing that is equal to 1.75% of the loan amount. VA loans also require no down payment, but do require borrowers to pay an upfront funding fee that can range from 0.5-3.3%. If you need help purchasing a new home, contact us today.