When you’re ready to buy a house, the odds are good that you’ll need to take out a loan.
And when you do you’ll have a variety of options to choose from, so it will pay to work closely with a mortgage professional to see which option is best for you.
Here are a few of the most common options available today
One set of choices includes conventional vs. government-insured loans.
Conventional loans are offered by private lenders and they usually require a higher down payment and higher credit score for buyers to qualify. If your down payment is 20% or more, you won’t have to pay private mortgage insurance (PMI) to cover you in case of a loan default. And if you are required to pay PMI, it generally is lower than insurance fees on government loans.
Government loans include FHA, VA and USDA loans, where approved lenders loan the money, but the government insures the loans in event of a default.
FHA loans generally allow for a lower down payment and credit score than conventional loans, but they also require a monthly mortgage insurance premium (MIP), which usually costs more than PMI rates and adds to your monthly mortgage payment. The advantage is that this type of loan can be easier to qualify for.
VA loans are targeted to veterans and include a zero down payment option. And with this loan type, you won’t be required to pay mortgage insurance.
USDA mortgages are offered in rural areas – and there are many areas considered rural in the U.S. – and can require no down payment and have lower mortgage insurance payments.
When taking out any mortgage loan, you’ll need to pay it off over time. Your normal options for mortgages include fixed- and adjustable-rate loans.
Fixed-rate loans mean that you’ll pay a fixed interest rate over the term of the loan, usually 30 or 15 years. Keep in mind that with a longer-term loan, the monthly payment will be lower but you’ll pay more in interest costs over time.
Adjustable-rate mortgages, or ARMs, start with a lower fixed rate for a period of time, say five years, but will be adjusted up or down annually after that.
Schedule an appointment to talk to us about these loan options and others to see which one will best meet your financial situation
