These are the two main mortgage types. Choosing the right one for your needs means considering how long you’ll live in the property.
With fixed-rate mortgages, your interest rate remains the same. You’ll pay more toward the interest on the front end, and more toward the principal over time. These loans are attractive because they provide predictable monthly payments.
With adjustable-rate mortgages, your interest rate can shift depending on market trends. This might mean that you end up paying more at some point during the repayment process. Know the adjustment frequency before you sign on for one of these loans!
If putting 20% down isn’t in the cards, then an unconventional loan may be the right move. Having a lower credit score makes these loans a solid option, too.
Unconventional loans are insured by the federal government. FHA, USDA, and VA loans are among the strongest choices for first-time homebuyers. You won’t need to put as much money down on the front end!
Unconventional loans often turn out to be the more affordable option for younger buyers. There are several federal programs aimed at helping first-time homebuyers. Through these programs, you may be able to make a much smaller down payment – if at all.
The Federal Housing Administration insures FHA loans. If your credit score hasn’t crested 600, you can still qualify for one of these loans. And you may be able to put down as little as 3.5%!
You will, however, need to pay mortgage insurance to cover losses if you default on the loan. You’ll need to verify employment for the past two years. And you’ll need to ensure that the home is where you plan to live – not a rental property.
The U.S. Department of Agriculture backs USDA loans. These are excellent choices for buyers with low incomes. While you don’t need to work in the agricultural industry, you’ll need to commit to living in a rural area.
You’ll also need to have a reasonable credit history and demonstrate a reliable source of income. At the same time, your income will need to be lower than the low-income cap in the region where you’re living. With USDA loans, you won’t put any money down.
Did you serve in the military or are you an active member? If so, a VA loan from the U.S. Department of Veterans Affairs can provide the help you need. Spouses may qualify, as well.
These loans don’t require a down payment. And on top of that, you won’t need to pay mortgage insurance. With conventional loans, you will need to pay mortgage insurance if your down payment is under 20%. Here’s a great guide if you are moving with the military.
When you’ve researched the loan types, what’s the next step? You’ll want to meet with a lender. And you’ll want to do that before you get too deep in the house-hunting process.
A good plan is to seek pre-approval first. Especially if you’ve never bought a home before, you might not have a clue how much you can afford. Pre-approval provides you and the seller a sense of how much house you can buy.
With pre-approval, a lender will look at your credit score, income, and other assets to see what loans are best. You’ll learn how much money the lender can provide, as well payday advance loans Riverside CT as the rate.