If you are in the beginning of the process of buying a home, you are probably starting to look at getting a home loan. Once you have your personal finances in order and your family is ready for the move, getting approved for a loan is likely the next box you want to check.
Make sure to do your research before securing a loan, however. There are many different types and it can tend to get confusing and overwhelming. Many people wind up refinancing their home sooner than they would like to because they didn’t understand the terms of their mortgage.
Here are five popular types of home loans that you may wish to consider.
Fixed-rate loans are probably the most common type. With these loans, you’ll have the exact same interest rate, as well as monthly payment, for the entire life of the loan – which is typically either 15 or 30 years.
This type of home loan is great for people who like predictability and plan to live in their home for a long time. It can be nice to not have to worry about rising and falling interest rates, and always knowing what to expect with your mortgage payments.
Mortgage rates with an adjustable-rate loan are usually lower than those with a fixed-rate loan, but only for a certain predetermined amount of time of around five to ten years. After that period, the rates will rise, usually once per year. These loans are best for people with lower credit scores who are unable to get approved for good rates on fixed-rate loans.
USDA Rural Development loans are designed for families who live in small, rural areas. If you live in or are moving to a big city, this is not the loan for you. These loans are best for those in rural areas who are struggling financially.
They put home ownership within the grasp of those who may not ever be able to achieve it otherwise. Remember that only certain homes are USDA-eligible though, and the amount of debt incurred from the loan cannot exceed a certain amount, which is dependent on your income.
As the name implies, VA loans are for people who have served in the United States military. They can be an excellent alternative to conventional loans, offering options with no down payment and no mortgage insurance requirements. In order to qualify, you must be able to prove that you have served in any branch in the military for a certain amount of time.
These are just a few options for home loans, but there are certainly many others out there. Look into all of your options and talk to multiple lenders before deciding which is right for you!