Which Loan Best Fits You?

First lets start with the basics:

What is a loan?

A loan is a sum of money borrowed that is expected to be paid back with interest. 

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When purchasing you're home, you'll need a mortgage loan (unless you're paying full in cash). A mortgage loan is a legal agreement made between you and a bank or preferred lender that lends money with an interest rate in exchange for title of the property being purchased. Upon the payment of debt, the title will be conveyed to the owner (you). 

When choosing what loan best fits first time home buyers, I recommend meeting with a mortgage broker before deciding on a loan. A bank can also provide loans too, except they are limited to that bank alone. 

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1. Conventional

2. FHA

3. VA

4. ARM

5. USDA

 

 

1. Conventional Loan:  This loan is the most common mortgage option. This loan is not made or insured by the government. This is called a non-GSE loan (non-government sponsored entity). Half of all conventional loans are called "conforming" mortgages due to being conformed by guidelines made by Fannie Mae and Freddie Mac. People usually choose conventional loans because they offer better interest rates and loan terms which results to lower monthly payments.

* Best For: Repeated Buyers *

Down payment: 20% standard - 10% minumum  (3% - 25% of a home's value) all depending on the borrower's credit and financial standing. Low rates for borrowers with excellent credit.

 

2. FHA (Federal Housing Administration) Loan: This option makes ownership more affordable with less down payment and easier credit requirements. An FHA loan is insured by the Federal Housing Administration. Borrowers who have FHA loans pay for mortgage insurance - this protects the lender from a loss if the borrower defaults the loan. Those with a credit score lower than 500 are ineligable for an FHA loan.  

* Best For: First time home buyers * 

Down payment: 20% standard - 3.5% minimum (with a credit score of about 580 or higher). Flexible guidelines. Low interest rates.

 

3.  VA (Veteran's Affairs) Loan: This loan is only available to veteran's. Designed to provide housing and assistance to veteran's for the chance to purchase a home without a down payment. As a veteran you must meet service requirements and credit/income requirements in order to be eligible. 

* Best For: Veterans only *

Down payment: No down payment.

 

Arm (Adjustable Rate Mortgage) Loan: A home loan with an interest rate that can change periodically. This type of loan fluctuates with the market but the initial rate starts out lower than a fixed-rate mortgage.

*Best For: Any interested buyers *

Down payment: 20% Standard – 10% minimum

 

USDA (United States Department of Agriculture) Loan: This mortgage choice was created to promote the purchase of rural land. Mainly for those who live in rural areas and for low-income borrowers.

*Best For: Investors *

Down payment: No down payment.

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For any further information or questions, please feel free to email me! Located under the "contact" tab!