What if you made a bad decision and had to pay for it for three decades?
That may sound crazy, but it can happen when you choose your home loan poorly. Many buyers don’t understand the different types of home loans they should consider before buying.
Keep reading to discover our guide to five great home and mortgage loan options!
1. Fixed Rate Mortgage
It’s important that you know the difference between a fixed or adjustable rate mortgage. Let’s start with the fixed rate.
As the name implies, a fixed rate mortgage has the same interest rate for the duration of the mortgage. This is usually the best choice if you intend to live in the home a long time, as it lets you “lock in” a good interest rate, but that’s all about timing.
2. Adjustable Rate Mortgage
Adjustable rate mortgages are different from a fixed rate. They typically offer a low rate of interest for the first five years and then the rate is adjusted (often upwards) every year.
This is a good option for someone who intends to sell their home after a few years. Alternately, you might take advantage of the low rate in the first few years and then switch to a fixed rate mortgage after that.
3. FHA Loans
If you are buying your first home, the FHA loan is one of the best types of mortgage loans around. It is specially designed for first-timers because it has lower credit requirements, and you may be able to buy with as little as a 3.5% down payment.
There is just one “catch” to these loans: they include a mortgage insurance premium that you must pay annually.
4. USDA Loans
USDA loans are very different home loans and are misunderstood by many people. This is because they are explicitly designed for use in “rural” areas.
Many people think of lonely areas with almost no population as “rural.” However, a whopping 95% of the country is considered “rural,” so you most likely live in a qualifying area.
These loans are attractive because you can obtain them with no down payment at all, and the mortgage insurance fees are relatively low. However, there is a catch: these loans are designed for people with low or “modest” income.
If you make less than 115% of the adjusted median income for your area, you can qualify.
Otherwise, you need to look at different types of home loans.
5. VA Loans
Make no mistake: VA loans are the best loans on this entire list. However, they have the strictest requirements. You must have served in the active duty military or spent at least six years in the National Guard Reserve to qualify.
These loans have it all, though. VA offers 100% financing, no down payments, and no mortgage insurance fees. Whether it’s your first home or not, VA is always the best choice if that option is on the table!
Types of Home Loans: The Bottom Line
Now you know about the different types of home loans. But do you know how to save for a down payment?
At In News Weekly, we are devoted to bringing you great info you can put to use right away. To see how we can help you save for a down payment, come check out some of our money making tips today!