Have you taken out a home loan with a down payment of 20% or less?…
Fixed-rate or adjustable rate? A conventional loan or a government loan? Figure out which loan option fits your budget and your needs with these helpful breakdowns.
Fixed rate mortgages are available in terms ranging from 10 to 30 years, and can be paid off at any time without penalty. This type of mortgage is structured so that it will be completely paid off by the end of the loan term.
Your monthly payment may vary if you have an “impound account”. In addition to the monthly loan payment, some lenders collect additional money each month (from folks who put less than 20% cash down when purchasing their home) for the prorated monthly cost of property taxes and homeowners insurance.
Overall, the payments in a fixed rate mortgage are very stable and predictable over a long period of time if you’ve found your dream home.
The initial rate on an ARM is lower than on a fixed rate mortgage which allows you to afford and purchase a more expensive home. Usually structured over a period of 30 years, the initial rate is fixed for anywhere between 1 month to 10 years.
All ARM loans have a “margin” plus an “index.” When the time comes for the ARM to adjust, the margin is added to the index, then rounded to the nearest 1/8 of one percent to arrive at the new interest rate. That rate will then be fixed for the next adjustment period.
If you don’t see yourself living in the same house for more than 5-7 years, an ARM may make more sense than a 30 year fixed rate mortgage.
FHA home loans are mortgage loans that are insured against default, and are available for single-family and multifamily homes. These home loans allow banks to continuously issue loans without much risk or capital requirements.
FHA loans allow individuals who may not qualify for a conventional mortgage to obtain a loan, especially first-time home buyers.
These loans offer low minimum down payments, reasonable credit expectations, and flexible income requirements.
The VA Loan provides veterans with a federally guaranteed home loan which requires no down payment. This program was designed to provide housing and assistance for veterans and their families
The Veterans Administration provides insurance to lenders in the case that you default on a loan. Because the mortgage is guaranteed, lenders will offer a lower interest rate and terms than a conventional home loan. VA home loans are available in all 50 states. A VA loan may also have reduced closing costs and no prepayment penalties.
Additionally, there are services that may be offered to veterans in danger of defaulting on their loans. VA home loans are available to military personal that have either served 181 days during peacetime, 90 days during war, or a spouse of serviceman either killed or missing in action.
All these mortgage options can seem overwhelming, but don’t worry, our Loan Experts can help you find the best solution for you. Taking the time to explore your options now can mean saving thousands of dollars in the long run.