Unsurprisingly, you’re on the hunt for a home loan. Most people can’t afford to pay cash for their homes. That’s why 65% of people who own homes need to take out a loan to do so.
However, there are many options available when you go this route. You may take out the wrong loan without the proper knowledge of your needs.
You need to explore all your options when you’re looking at loans for homes. Below are the most common types of loans for homes you’ll see when you want to get a mortgage.
FHA Loan
An FHA loan is one for first-time home buyers. Lenders don’t always want to lend to people with unproven payment histories. They can also end up charging more interest for people who aren’t proven or have poor credit.
An FHA loan will help you in this situation. The government subsidizes these loans, so they help first-time buyers get their first mortgage. You’ll get a great interest rate and only have to put down 3.5% on your home instead of 20%.
Jumbo Loan
A jumbo loan is for people looking to buy expensive property. They offer similar rates to traditional home loans but are usually harder to qualify for. That’s because they’re for people buying homes worth millions of dollars.
You’ll need to prove you have assets and cash flow available that will help you pay your loan every month. However, you will be able to buy a home in a high-value area if you can prove you have the means to pay it off.
Adjustable-Rate Mortgage
An adjustable-rate mortgage is similar to a traditional loan, but you won’t get a fixed interest rate over the life of a loan. The rate may stay the same for some time, but your lender will eventually get the chance to change your rate in the future.
These loans may be good if you only plan to stay in a home for a few years. You typically have a few years before the mortgage company changes your interest rate, which means you can save a lot of money in interest.
However, you can end up with large payments you can’t afford if you stay in your home and market conditions change after your lender is allowed to change your rates.
Fixed-Rate Mortgage
A fixed-rate mortgage is what most people will get when applying for loans for a home. You get a loan term of 15 or 30 years and pay a fixed interest rate over the life of a loan.
Lenders typically want 20% down in this situation. However, you know exactly what you’ll pay monthly and won’t have any surprises driving up your monthly cost.
On top of that, you may be able to get a cross collateralized loan, which means you can use collateral to help you qualify for your mortgage.
Now You Know the Common Types of Loans for Homes
You’re making a big decision when you get home loans, so you can’t afford to get in a situation where you get a bad deal. You need to learn about the types of loans for homes that are available if you want to make the right choice. Keep the types of home loans above in mind during your search to inform yourself with the knowledge you need to make the best decision.
Check out the blog for more tips that will help you make smart real estate purchasing decisions.
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