Buying a home comes with a lot of information and steps, but even more so for those that are financing their purchase. There are many types of mortgages out there, and depending on your area, income, and type of home, one mortgage might suit you better than another. Below are some of the most common types of home loans.
Adjustable-Rate Mortgage (ARM): A mortgage that permits the lender to adjust the interest rate periodically on the basis of changes in a specified index. Typically, the initial rate is lower than most other loans, and can often be locked in for a certain time period, such as one or five years. After this locked in time period, the rate can be adjusted.
Fixed-Rate Mortgage: Unlike an adjustable-rate mortgage, a fixed-rate mortgage is when the interest rate is locked in, and will not change throughout the life of your loan. Most fixed-rate mortgages are for 30 or 15 years, however, some lenders may offer 20 year, or even 33 year mortgages.
FHA: An FHA loan is insured by the Federal Housing Administration and is backed by the government. Unlike some other mortgages, down payments can be as low as 3.5% of the purchase price, and those with lower credit scores may qualify. An FHA mortgage does require mortgage insurance premiums.
USDA: A USDA mortgage is one that is backed by the US Department of Agriculture. Many automatically think a USDA mortgage is only for farms, however this is not the case. A USDA loan is great for buyers who fall within certain income guidelines in rural and even some suburban areas. On most properties, the buyer is not required fo make a down payment, and loans and grants for home improvements are available. There are income limits and property value caps, so if you are considering a USDA loan, talk to your lender to see if you, and the property, qualify!
VA: A VA loan is backed by the department of Veteran Affairs, and is for military service members and veterans. No down payment is required with a VA loan, and there is no mortgage insurance. However, there is an upfront VA funding fee that must be paid, you can learn more about the VA funding fee by clicking here.
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