5 Mortgage Loans for Future Homeowners
Whether you’re a first-time homebuyer or you’ve done the whole thing before, buying a house is probably more stressful than fun. You have to figure out if you can afford your mortgage loan, if you can save enough for the down payment, and which kind of mortgage is best for you.
However, this doesn’t mean that taking out a mortgage loan should be a stressful process. If you need help finding the perfect mortgage loan to suit your situation and make your dream of home ownership a reality, read on.
Applying for a conventional loan may be a more feasible option in some cases. They come in two variants: conforming and non-conforming. Since the loans are not backed by the federal government, they don’t require mortgage insurance or employ down payment or home equity requirements. Qualifying for these loans takes a financial analysis of your credit history and income levels.
Although the conventional loan limits are lower, jumbo loans can help you maximize your borrowing power for a more expensive home. These loans typically have higher minimum credit score requirements than conventional loans, but interest rates tend to be competitive compared to other types of loans.
The U.S. government may not be a mortgage lender, but it does play a role in helping more Americans become homeowners. There are three government agencies involved in backing mortgages: The Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), and the U.S. Department of Veterans Affairs (VA).
FHA, VA, and USDA loans can help you finance a home when you don’t qualify for a traditional loan, provided you meet the eligibility criteria. They are government-insured and require lower credit requirements and lower down-payments than traditional loans. They also offer unique options to first-time homebuyers, such as low or no down payment requirements.
Fixed-rate mortgages really live up to their name. Their interest rate never changes, so your monthly mortgage payment is consistently the same no matter where interest rates go. Fixed loans traditionally come with terms of 15 years or 30 years, although some lenders are offering shorter terms now.
If you want to own a home in the future but don’t have the cash for a down payment, you may consider a mortgage product known as an adjustable-rate mortgage (ARM). The terms, interest rate, and payment on these loans change every year over the life of the loan, but homeowners are able to make one adjustment annually as needed.