If you’re thinking about buying a home, now is the time to act. It’s not hard to find a good loan these days. However, there are many different types of home loans that you should learn about so you know what will be best for you before talking to a lender. The more information you have before seeing the lender, the better prepared you will be to advocate for yourself during the home-buying process.
Certain factors will impact your home loan regardless of the type of loan you get. Those factors include the down payment, interest rate, loan amount, your credit report, and the property appraisal. A lender can preapprove you for a mortgage loan, letting you know how much you can qualify for. However, you need to determine what you are comfortable with as a monthly mortgage payment and use that as a starting point to determine your price range based on current interest rates.
You can figure that out by working backward from the monthly payment amount based on a 30-year loan. There are amortization worksheets available online that will help you figure that out. If you see a house you like, you can also use the online amortization tools to determine the monthly payments based on the interest rate and loan term.
The home buying process should be an exciting one as you are making a huge move in your life. Here are a few of the different loan types that you may qualify for. the best home loans will be the ones that can get you the house you want at an affordable price.
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Fixed-rate Loan
A fixed-rate mortgage loan means the interest rate you get at the loan origination will be the same interest rate for the life of the loan. This can be positive or negative depending on whether the interest rates go up or down after buying your home. One of the reasons many people prefer fixed-rate loans is because they always know what their mortgage payment will be because it does not change.
Adjustable-rate Mortgage
An adjustable-rate mortgage loan allows for fluctuations in the interest rate based on actual changes in the interest rate. If the interest rate goes down over the life of the loan, this will work to your advantage. However, if the interest rate goes up, this will be a disadvantage.
VA Loan
A VA loan is specifically for veterans and their immediate families and is offered through the Department of Veteran’s Affairs. This program was designed to help those who fought for the military’s country to buy houses when they returned home. This program started in 1944 as part of the GI Bill to help veterans while also stimulating the economy.
Conventional Loan
A conventional loan is a mortgage you get through a private lender. A government agency like the FHA does not back them, and VA loans are backed. Anyone can apply for a conventional loan, and their chances of getting one will depend on several factors, including their income, credit score, and house appraisal. Interests rates can vary greatly on conventional loans, and a conventional loan can be either a fixed-rate or an adjustable-rate loan.
USDA Loan
A USDA loan is a government-backed mortgage program specifically for rural areas. These loans are ideal for prospective farmers and others interested in development in rural areas. The criteria for these loans are different than other loan programs because they are regionally based.
FHA Loan
An FHA loan is a government-backed mortgage program for those unable to meet conventional home loan criteria. The minimum required down payment and credit score are lower for FHA loans than conventional loans. Normal rates will still dictate the interest rate at the time of loan origination.
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