Whatever your home financing goals, knowing your options is a good first step.
FHA and VA Loans
If you’re looking for a low-down-payment loan option, you may benefit from a loan insured by the Federal Housing Administration (FHA) or the Veteran’s Administration (VA). FHA provides mortgage insurance to lenders to protect against default by the borrower. VA provides similar protection to lenders making home loans to eligible Veterans of the United States Armed Forces. Both of these program offer potential benefits to eligible buyers.
Benefits of an FHA for VA Loan
FHA Loan Benefits:
Lower down payment requirements – as low as 3%
Expanded qualifying parameters
Closing costs can be financed, reducing the initial out-of-pocket costs to buyers
“Gift money” may be used or down payment and closing costs
VA Loan Benefits:
Borrow up to 100% of the home’s purchase price
No monthly mortgage insurance premium
Limitation on buyer’s closing costs.
An FHA or VA loan might fit your needs if:
For an FHA Loan:
You don’t have a lot of funds available for out-of-pocket costs, including down payment
Your source of down payment is gift money from mail and/or friends
Your credit is good, but not perfect
For a VA Loan:
You are an eligible Veteran of the United States Armed Forces
You wish to finance up to 100% of the purchase price of the home.
Fixed-Rate Home Loans
With a Fixed Rate Home Loan, your interest rate stays the same throughout the life of your loan. So your payment doesn’t change regardless of changes in the economy such as interest rates or inflation.
Benefits of a Fixed-Rate Home Loan
A fixed-rate loan provides long-term stability – your payment (principal plus interest) won’t change over the life of the loan
You can lock in a low interest rate for the life of your loan
You can choose the term (repayment period) that works best for your needs. With a shorter term, your monthly payment will be higher, but you’ll own the home sooner and pay less interest. With a longer term, you’ll have lower monthly payments, but you’ll pay more interest over the life of the loan.
A fixed rate loan is one of the simpler types of mortgage loans, so it’s easy to understand.
A fixed Rate Home Loan might fit your needs if:
You’re borrowing when interest rates are relatively low and are expected to rise
You plan to stay in your home for a long time
You don’t expect your income to increase significantly during the time you hold your loan
You’re a first-time home buyer or need affordable housing options
Adjustable Rate Mortgages
With an Adjustable Rate Mortgage (ARM), the interest rate adjusts on a specified schedule, after an initial fixed period such as three, fire or seven years, depending on the terms of your loan. After the fixed period ends, your rate adjusts annually – the adjusted rate may go up or down, depending on market conditions. Changes in your interest rate are usually limited by two rate-adjustment “caps” – one cap for each adjustment period, and cap for the life of the loan.
Benefits of an Adjustable Rate Mortgage
An ARM generally gives you a lower initial interest rate, potentially freeing up extra cash early in your loan
An ARM can allow you to qualify for a larger lion amount
An ARM allows you to take advantage of falling interest rates without the costs associated with refinancing
Because your initial payments on an ARM are lower, you may have more cast to save or invest each month
An adjustable Rate Mortgage might fit your needs if:
You don’t plan to stay in your home for long
You expect interest rates to go down
You expect your income to rise over time.