One of the biggest financial decisions you’ll ever make is choosing the right type of home loan. Home loans offered by banks, investment houses, and credit unions vary considerably in terms of their interest rates and fees but also, more importantly, in the services provided, which may be bundled in with the loan itself or offered separately by other organizations.
Conventional Mortgage Loan
Conventional loans are the go-to choice for many homebuyers when buying a home. Conventional loans offer great rates, many down payment options, and flexible terms.
They’re also called “conforming loans” because they conform to Fannie Mae’s and Freddie Mac’s standards.
Many US lenders offer conventional loans, and most of them require a credit score of 620 or higher. It requires a down payment that can be as low as 3%, and there won’t be any upfront mortgage insurance fee. Additionally, a conventional loan is available for all property types with fixed and adjustable rates available to you.
The loan terms can be from 10 to 30 years, and you can cancel your Private Mortgage Insurance (PMI) when you have 20% home equity. Finally, you can get a loan amount as high as $647,200 today.
An FHA loan is an excellent option for many first-time homebuyers and those with less-than-perfect credit. FHA loans are insured by the federal government, which means that this mortgage loan carries lower interest rates than many conventional mortgages.
The attractive interest rate is especially accessible to borrowers with a credit score of 620 or below. In fact, a borrower with a 590 credit score could get an FHA loan with 10% down.
This type of mortgage loan is also available for all property types, with fixed and adjustable rates.
Many veterans choose a VA mortgage to help them transition from the military to civilian life. Available through the Department of Veterans Affairs, these loans offer several potential advantages to qualifying veterans and active-duty military personnel.
The VA doesn’t charge mortgage insurance, which means you can request a zero-down payment loan. They are available with flexible terms and competitive rates for active-duty military service members.
Adjustable-Rate Mortgages (ARMs) offer the lowest initial interest rate but come with future interest rate uncertainty. These loans have a set interest rate for a certain time period, then are adjustable (either increasing or decreasing) after that time period.
The lower the initial interest rate, the higher the monthly payment. And, because ARM interest rates can change at any time, your payment can go up dramatically. That’s why it’s important to calculate what your payment will be at the end of the initial fixed period to ensure it meets your budget.
Get Your Dream Home
The right mortgage for you is the one that most closely meets your needs at a price you can afford. A good first step is to understand the different types of home loans and the basic terms. What’s available to you depends, in large part, on your financial situation and the home you want to buy. Work with a mortgage professional to determine the best loan type and mortgage rates that best fit your needs.
Find the right home mortgage in Florida and Oklahoma today. Cross Timbers Mortgage helps people find the right mortgage or their specific financial goals. Contact us!