If you’re taking out a mortgage for the first time, you’ll likely have some questions about affording a home. Working with a lender that will make your experience as easy as possible is ideal. However, you’ll first need to learn which types of home loans are available.
If you decide on an FHA insurance loan, the Federal Housing Administration will guarantee that it will cover your mortgage if you’re unable to make payments. All types of borrowers consider this type of mortgage since a low down payment—typically 3.5 percent of the loan amount—is required. Further, the qualifications are usually easier than a conventional mortgage.
If you’re a military veteran, you may be eligible for a VA loan. The Department of Veterans Affairs distributes these loans, and allows veterans to purchase a home with a small down payment. In some cases, you won’t have to pay a down payment at all.
Conventional mortgages are an option as well. These are often underwritten based on Fannie Mae or Freddie Mac guidelines. The two types of conventional mortgages are variable rate mortgages and fixed rate mortgages. A fixed rate mortgage is predictable, since you won’t have to worry about your mortgage payments or interest rates increasing. This makes it easier for you to manage your budget. This type of mortgage is also best if you plan on staying in your home for 5 years or more.
Variable rate mortgages have an initial interest rate that is lower than what you’d get with a fixed rate mortgage, but the interest rate will change over the years, making your payments increase or decrease. If you aren’t planning on living in your home for 5 years or more and eventually expect to make more money, this may be the best mortgage for you.
To make the final decision on which mortgage will work best for your current goals and budget, talk to a trusted loan officer who can help you narrow down your choices.