There are many different types of home loans available for prospective home buyers to choose from. The important thing to keep in mind when choosing a home loan is if it is right for you and your financial situation. Choosing the wrong type of home loan can become a financial burden that you may not be able to keep up with. That is why it is important that you fully understand all of the terms and the manner in which you must repay the loan.
Many prospective homeowners are trying to find the best deal they can, but remember, if it sounds too good to be true, odds are it is. If you educate yourself on the different types of loans available you will decrease the chance of choosing a mortgage that can come back to haunt you. Take into consideration your current financial situation and choose a loan based on what you are able to afford, do not get talked into borrowing more than you can pay back.
First there are conforming and non-conforming loans. A conforming loan is one that has met the requirements set forth by banks. If it meets the guidelines it is considered a conforming loan. A conforming loan generally is $417,000 and below. A non-conforming loan is one that hasn‚Äôt met the requirements of the underwriter and is in an amount over $417,000. A non-conforming loan will usually have a higher interest rate as a result of not meeting the requirements necessary.
Government loans consist of an FHA and VA loan. An FHA loan is financed by the Federal Housing Administration. A VA loan is one that is acquired through the Department of Veteran Affairs. The amount that can be borrowed through one of these types of loans tends to vary from state to state. If you are a veteran and qualify for a VA loan, you are able to use it up to three times.
A 30-year fixed mortgage is one of the most popular choices among buyers. A 30-year fixed loan will provide you with an interest rate that is locked in for the entire 30-years of your loan. This will insure that your rate will not rise unexpectedly. Along with your mortgage payment you will be required to also pay taxes and insurance, so it is important to keep that in mind when budgeting for your mortgage payment.
If you choose to go with a 30-year loan, you will not necessarily be locked in for the full 30-years. You have the option to pay it off early or refinance it through another lender to secure a lower interest rate. There is also the option of choosing a 15-year fixed mortgage, if you choose this option your loan will be paid off sooner, but your payments will be higher. This may be a better choice for those who can afford to pay off their mortgage faster, but many prospective buyers choose the more popular 30-year fixed loan.