Different Types of Home Loans
With the millions of homes in foreclosure around the nation and abroad as a result of the sub-prime mortgage crisis, you may feel now is the time to buy a home. Undoubtedly the question you may ask is: “What home loan is right for me?” While there are several different types of home loans available, there is one caveat: Choose a reputable bank or mortgage lender through research and phone calls. After a selection has been made, read the terms and conditions thoroughly.
Before you apply for a loan, ensure that: (1) You have enough money for a down payment, (2) You are sure you can make the monthly payments, (3) You have a high FICO score and low credit card debt, and (4) You have enough income to pay for utilities, food, and other necessities.
As for the different types of home loans available, there are several options: a fixed-rate mortgage, an adjustable-rate mortgage, a hybrid loan which encompasses both fixed and adjustable-rate mortgages, a FHA Loan, a Veterans Loan, and a traditional loan from your bank.
Depending on your circumstances and if you meet the aforementioned criteria, you should have no problem applying one or more of these loans. For example, the fixed-rate loan is more conducive to setting your budget knowing you will be paying a set mortgage rate every month. You don’t have to worry about inflation or market instability, and you can either choose a 15 or 30-year payment plan.
The adjustable-rate mortgage is one wherein the interest rate can fluctuate. At the present time, you may want to steer clear of this type of loan since it may increase to a rate you cannot afford to pay. The same applies to the hybrid loan. With market conditions such as they are, the rate of interest may rise with this type of loan as well.
The Federal Housing Authority (FHA) and Department of Veterans Affairs (VA) are government loans that are designed to assist in home ownership for individuals who may not qualify for a traditional loan. It should be noted that these loans are offered by private lenders although they are government insured.
You can also apply for a home equity loan if you already own a home and need additional funds for home improvement, college tuition, or debt consolidation. The interest rate is determined by the value of your home and FICO score. If you default on payments, the lender can begin foreclosure proceedings.
While it may be tempting to purchase a new home, especially since there are millions of homes available on the market at the present time, research and financial consideration should be given to ensure you are not putting your family into debt but can comfortably pay the mortgage and/or loan without straining the family budget or adding needless stress as well. It's important to understand the different types of home loans available and pick the one that is best for you.