If you’re a first-time home buyer or if you haven’t bought a new home in the last five or ten years, it will be beneficial to know and understand the type of mortgages available so that you can choose the best one for you.
Your home might be the most expensive purchase you can make in your life so it’s just right that you are really critical about every decision you make in home purchasing. It might be nerve-wracking because a mistake may be costly with planning. Your home buying experience may also be improved with the help of a home mortgage advisor.
Before anything else, you must know what lenders look at to assess what loan they can give you. Here are some of them:
- Source of Income – The lenders want to make sure that you will be able to pay the loan back. Having a stable source of income is an advantage.
- Proof of Income and Employment – you have to be able to provide proof for the income you have stated.
- Debt-to-income-ratio – This is computed by adding up your monthly payment obligations and then by dividing it by your gross income. This also helps the lenders assess if you will be able to pay the loan they will give you.
- A good credit score – This is very important information that lenders need. All lenders look at your credit score. Some require a high credit score and some accept low credit scores.
- Down Payment – the lenders know how much you can pay upfront for the house that you are planning to get.
Types of Mortgages and Loans
VA Loans – Guaranteed by the United States Department of Veterans Affairs. These programs are for the military members who are currently serving in the U.S. Army. This funding does not require any down payment; however, it has a funding fee charge equivalent to a loan fee percentage.
Federal housing administration (FHA Loans) – This is a go-to program for buyers with weaker credit. This type of loan requires borrowers to pay a one-time up-front mortgage insurance premium equal to 1.75% of the home loan.
Conventional loans – This type of home buyer loan is not offered or secured by a government entity. These are available through private lenders such as banks, credit unions, and mortgage companies. For this type of loan, most lenders would require you to pay a 20% down payment.
Fannie Mae or Freddie Mac is a conventional loan, which only requires 3% down of the loan. It is best for a buyer who has strong credit but a minimal down payment.
FHA Section 230(K) loan – This is a construction loan that finances both the purchases and repairs of a home. This allows individuals to buy a home and renovate it under one fixed or adjustable-rate mortgage.
State local and first-time homebuyer program – In some states, home authorities combine closing cost and down payment assistance specifically for residents.
Good Neighbor Next door – To qualify in this program, you have to be a law enforcer officer, Firefighter, teacher employed (full time), or an emergency medical technician.
Home Renovation Loan – With one loan, you can renovate your purchased home.
Dollar Homes – Single-family homes acquired by the FHA are part of HUD as a result of foreclosure actions.
Before you start your path to home-ownership, it is best to get as much information and prepare for the financial responsibility ahead of you.
