Loans Are Available for Just About Every Type of Home Buyer
Buying your first home is one of life’s most exciting endeavors, but that excitement can quickly turn to frustration once the loan process begins. The frustration not only comes from the stress of meeting all of the loan requirements, but also in choosing the right type of financing option for your home.
By researching the various home loan options before you start looking at houses, you’ll have a better idea of what to expect when dealing with lenders, as well as a better understanding of what type of incentives or financial perks you might be eligible for. In this guide, we help you learn more about your home loan options so you can find out which type of financing might be right for you.
FHA Home Loans
The Federal Housing Administration (FHA) is a part of the U.S. Department of Housing and Urban Development. This organization offers first-time home buyers a variety of different mortgage loan programs to choose from. FHA loans are traditionally the most popular among first-time buyers because they have lower down payment requirements (sometimes as low as 3.5% of the home price) and easier qualification requirements for conventional loans. To learn more about this type of loan, click here.
Conventional Home Loans
Conventional home loans are the most difficult types of mortgages to qualify for thanks to their strict qualification requirements, but they remain a popular choice because they feature low fixed interest rates. This type of home loan is not insured or guaranteed by the federal government, however.
Some of the hurdles you can expect to have to overcome when applying for a conventional home loan include a high down payment, a very good credit score, and a relatively high income. If you’re required to have private mortgage insurance on your loan, you can expect it to be a little more expensive due to the fact that the loan isn’t guaranteed by the government.
VA Home Loans
VA home loans are not provided by the U.S. Department of Veterans Affairs (VA), but the agency does guarantee the loans. The VA guarantees home loans for qualified veterans and service people so they are able to obtain the home loans they want with more favorable terms.
Unlike other home loans, VA loans can usually be obtained without having to put down a down payment, and the qualification requirements are substantially softer than conventional loans. There are limits on VA home loan amounts and there are some types of properties that aren’t eligible for this type of loan.
If you’re a veteran or member of the Armed Forces, you can request a certificate of eligibility from your local VA office because you’ll need that a href=”https://www.benefits.va.gov/homeloans/” target=”_blank”>before you can apply for a VA loan.
Additional Mortgage Loan Options
The above loans are the three most common among new homeowners, but they’re not your only options. For instance, the U.S. Department of Agriculture (USDA) has its own homebuyer assistance program, although it is not well known among home buyers. Like VA loans, loans obtained through the USDA program are guaranteed by the USDA, can be obtained without a down payment, and come with fixed interest rates.
If you’re interested in buying an older home and updating it to be more energy efficient, then you may find an energy efficient mortgage (EEM) to your liking. This type of loan can be used side by side with a VA or FHA loan. They are designed to help the buyer make the necessary upgrades without having to put down a larger down payment.
So as you can see, there is a wide variety of different loan options that a first-time home buyer can consider before taking the plunge into homeownership. Take your time and research them thoroughly so you can select the type of mortgage that fits your lifestyle and budget.
Article written by Carson Buck, real estate agent out of Phoenix, AZ
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