Are you looking to buy a home? When you begin the process and learn about different types of properties and loan options, you'll probably find that there a few different types of real estate mortgage loans available for you.
We will discuss types of loans and things to be aware of when it comes to your home search. Your final decision the type of mortgage you get will depend on your financials and the property you are buying.
The Federal Housing Administration, a government agency in the Department of Housing and Urban Development is responsible for FHA mortgages. With the FHA loans, borrowers pay for mortgage insurance built into their monthly payments and this will increase your monthly payment without a huge benefit to the borrower.
These loans are convenient because they involve smaller down payments of 3.5% of the homes price. Also, the lending standard is friendlier compared with other loans with looser requirements to qualify for the loan.
When searching for a home, if you will be getting an FHA mortgage, you will want to look for homes that are more move in ready and do not have a lot of major issues. In my experience, I most commonly see what heaters not being strapped to the wall, exposed electrical wiring and cracked/broken windows have been the main items I’ve seen these items can prevent an FHA loan from closing.
Conventional loans are loans that are insured by the federal government and are one of the more common loan types that we see clients use. While these loans do require a higher credit score, they typically allow for lower down payment options starting at 3% of the homes price and go up.
One benefit is that the loans are less restrictive with the home in regards to the overall condition. This will allow you to make offers on properties that need work and not have the concern of the loan being able to close.
These loans are for individuals who have served our country and offer a few benefits that make these loans stand out. With the VA loans, they will have a no down payment option or low down payment if you prefer so you have less out of pocket expenses. They will also not have mortgage insurance like an FHA loan, this will decrease your overall monthly payment to make things still affordable.
One drawback that we do see with these loans is the restrictions regarding the properties condition. They require that the home is in move in condition and will not allow structural issues with the home.
USDA loans are designed for rural homebuyers and are meant for folks that are living further out in the country compared to being closer in town.
Getting a home is a great feeling, but considering the financial side of things is very important. When choosing a mortgage, make sure you select one that is a good fit for you and your financial future. Each loan has different benefits and drawbacks to consider but understanding these will help you make a better decision. If you have questions regarding your options, make sure to reach out!