Which Home Loan is best for you?

If you are planning to buy a home, you might be looking at the home loan options as well. There are several types of mortgages to choose from that offers different terms so it’s important to understand each one before making a decision.

 

When it comes to finding the right loan for you, consider your place, how long will you stay there and other relevant variables. Choosing the right home loan for you will help you save few bucks on down payment and interest.

 

Five Common Types of Home Loans

Below is five of the most common type of loans in the USA, check out each one of them and decide on which suits your current state.

 

  1. Fixed Rate Mortgage

This is the most popular type of home loan offering a single interest rate, monthly payment for a lifetime cap which is usually 15 or 30 years. Fixed Rate Mortgage is ideal for s homebuyer that has no plan on moving anywhere else soon. It’s very straightforward; you just have to pay for a fixed amount for a fixed period of time. The current interest rates won’t affect this type of home loan.

 

  1. Adjustable Rate Mortgage (ARM)

This mortgage offers a lower interest rate compared to a Fixed Rate Mortgage for a specific period of time like for 5 or 10 years. However, after that given time, your interest rates will adjust approximately once a year similar to the current rates. The catch here is if the interest rates went down you will pay less but if it went up, your monthly payments go as well.

 

The arm is suitable for those who have low credit scores because most of the time poor credit gets high rates on a Fixed Rate Mortgage. ARM push those interest rates down to make home owing worry-free to the buyer.

 

  1. USDA Loan

This loan is intended for families located in rural areas. The government pays the total price of the home which means no down payment required and this is tied up with a discounted interest rates too. If your family is going through a financial struggle, this is the best option to buy a house. You will be required to pay for mortgage insurance though.

 

  1. VA Loan

If you served as the USA military army, a VA or Veterans Affairs loan would be an excellent choice. You can own your dream home without needing a down payment and mortgage insurance. In order to qualify, you must have served 90 days consecutively during the war, 180 days during peacetime, or six years reserve. This loan is also strict on the type of home you can purchase.

 

  1. FHA Loan

FHA stands for Federal Housing Administration; it can bring the down payment for your purchase home as low as 3.5% compared to other home loans that require 20% down payment. If you don’t have enough savings to use for the required down payment, this home loan will spare you a headache. However, this type of loan comes with a warning. Most loans have price limitation and don’t much flexibility. Rates are fixed as well as the payment terms (either 15 or 30 years). You may also be required to pay mortgage insurance.

 

Regardless of which home loan type you chose, make sure you use a mortgage calculator builder by Calconic in computing your monthly or even total payments. This tool can also help you make informed decisions on which home and type of loan are appropriate for you.

 

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