With all the different loan types out there it can be hard to decide which one is right for you and your needs. Our preferred lenders are here to help you understand and decide on the best loan for you, but below is some helpful information about the variety of available loans.*
This loan type is for a military home buyer. These loans are considered to be the most borrower friendly of the loan types. They come with a guaranty from the Department of Veterans Affairs. Certain veterans and active-duty personnel qualify for this program.
Only VA-approved lenders issue these loans, because of the guarantee they incur less risk. Consequently, VA loans tend to come with slightly lower interest rates than traditional mortgages. For active-duty borrowers, the VA caps interest rates. Lower interest rates lead to smaller monthly payments for you, the home buyer.
Qualified borrowers won't pay anything down to finance 100 percent of their home. Even when military home buyers do make a down payment on a VA loan, many times it is much lower then the traditional mortgage standard of 20 percent down. VA loans are ideal for first-time military buyers.
These loans are backed by the Federal Housing Administration (FHA), designed for first-time home buyers and are available to anyone. A down payment for a FHA loan can go as low as 3.5 percent, and can be paid through gifts received by non-profit organizations, friends and/or family. There's a chance borrowers pay zero percent down if they combine their FHA loan with another loan type.
Your income-to-debt ratio, which is just the amount of money you owe in comparison to how much you make, can be as high as 55 percent and you may still qualify for an FHA loan.
Interest rates on FHA loans fluctuate within 0.125 percent of conventional loans. Just like VA loans, FHA loans do not immediately rule out borrowers who have a bankruptcy or foreclosure in their past. Credit standards for both of these government-backed programs are more lenient than conventional loans. The FHA is less concerned with your credit history and focuses more on your ability to pay back the loan.
Conventional loans, or traditional loans, come with down payments as high as 20 percent. As a result, these loans suit homebuyers who have saved a significant amount of money. The upside to large down payments is competitive interest rates, assuming you credit history is excellent.
Another important decision for home buyers is choosing an adjustable-rate mortgage (ARM) or a fixed-rate mortgage (FRM). The former usually come with a fixed-rate period, but interest rates fluctuate with the market thereafter.
*As a potential new home buyer you of course need to talk with a certified financial lender before making any important home loan decisions or other financial choices concerning the purchase of your home. Napolitano Homes has many excellent Preferred Lenders that are here to answer any of your questions and help you through the purchase of your new home.