Purchasing a home for the first time can be a daunting experience. There are many factors you need to consider before even touring a home. One of the most important of these is the mortgage loan. Depending on your situation, you might have a few options regarding the type you choose to accept. Therefore, to assist you in determining the best type of mortgage for you, the following explains the various options you may have.
Conventional Mortgage
Mortgages are placed into categories depending on their type of stipulation, such as the amount and whether or not they are provided by the government. Conventional mortgages simply mean that they are not apart of any government program. They are usually less expensive than FHA loans yet are drastically more difficult to obtain. However, this does not deter people because they do provide plenty of benefits. Some of these include having lower interest rates as well as place you into a long-term loan, which can provide low monthly payments. Some of the negatives included in a conventional mortgage are that they are often dependent on the property. Lenders only want to provide buyers this type of loan if the property meets their expectations. Lastly, the process of this type of mortgage can be extremely slow, with paperwork taking over 30 days to process.
Jumbo Loan
The reason for a jumbo loan is to allow buyers to up their buying power and purchase a luxury home. Yes, a jumbo loan does contain a few more requirements than a normal mortgage loan, but it actually does not require the buyer to put down a 20% down payment. In fact, with some financial maneuvering, you can put down as low as 5% – 10%. There are a variety of benefits of a jumbo loan that can be very attractive. These include providing you with larger loan amounts as well as a low-interest rate most of the time. The low down payment required is also an attractive incentive for buyers. However, with any loan, there are some cons. Any score under 680 will most definitely require a larger down payment. Lastly, you might also be required to have over six months of payments in your bank account before getting approved.
Special Loan Programs
There are a number of government-funded loans or Special loan programs that buyers who are qualified can take advantage of. Often these are much easier to obtain than say a conventional or FHA loan. These loans include USDA, VA, and many local type loans, which often aid lower-income families or even teachers of the community. Many first time buyers focus on these types of loans because they offer low mortgage interest rates as well as the option to place zero down. The only negative is that you are placed with some restrictions. This might include having to adhere to geographic restrictions. This means you can only look for homes in certain areas of your city. Other issues you might run into involving your income. If you are making a little too much per year, that can instantly disqualify you, even if it isn’t by much.
Understandably, homebuyers tend to be a little intimidating with the number of loans out there. However, by reading the list above as well as conducting your own research, you can begin to form a more clear picture of the ideal mortgage loan for you.
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