What You Should Know About Home Loans
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There are several different kinds of conventional loans available for home buyers, and you’ll want to research these options thoroughly before deciding on your mortgage loan. Conventional mortgages are loans made by banks or private lenders and can be either fixed-rate or adjustable-rate. If you’re considering a home purchase in the near future, here’s what you should know about the different types of conventional loans that may be available to you.
Conventional Home Loans – Fixed Rate
Fixed-rate conventional loans are convenient, low-maintenance mortgages. These mortgages offer low-interest rates and your monthly payments are fixed for the life of the loan. They allow you to pick your term, from 5 to 30 years, and lock in today’s interest rates. They’re good options for anyone who likes the predictability of a fixed rate or wants flexibility in choosing a home loan term.
Conventional Home Loans – Adjustable Rate Mortgage (ARM)
An ARM’s payment is tied to an index or formula that calculates each year’s new interest rate based on financial factors such as changes in the prime rate and the Consumer Price Index (CPI). The new, adjusted interest rate generally takes effect once a year. ARMs can have either a fixed or variable adjustment, hybrid, which allows for both. ARM rates typically adjust annually, following an initial fixed-rate period of 3, 5, 7, or 10 years.
FHA Loans
An FHA loan is a mortgage for people with less than perfect credit. It allows buyers to purchase a home and still only have to pay interest on 30% of the loan amount. FHA loans feature low minimum credit score requirements, flexible mortgage insurance premiums, and down payment options that are unmatched by other types of home loans.
VA Loans
If you served in the military, your next home may be a VA Loan. VA loans offer competitive interest rates and you never pay a penny in interest because it’s all covered by VA funding.
USDA Rural Housing Loans
In today’s real estate market, getting a rural home loan can be extremely difficult. Thankfully, there is one government agency that will still lend to homebuyers purchasing a property in a remote location. This agency is the USDA. USDA rural housing loans offer benefits to both buyers and sellers of properties in rural areas. The loans are offered by the Federal Housing Administration (FHA).