Becoming a first-time home buyer is very exciting and has many facets you need to understand. A big part of this is knowing your many mortgage loan options.
Minimum Down Payment
This is very important because different down payment amounts will affect your mortgage options. The standard is 20% of the cost of your home should be put up for your down payment. There are mortgage programs out there that allow a very low down payment as little as 3% of the purchase price.
Payment Terms
This refers to the total amount of time you can have to repay your mortgage. The mortgage loan is always paid on a monthly basis. The majority of loans have repayment terms of up to 30 years.
Fixed-Rate Loan
This type of loan will have an interest rate that will not change through the life span of the mortgage. These are the more stable types of loans and are a great option for first homeowners.
Adjustable-Rate Mortgage (ARM) Loan
An ARM loan does not have the same interest rate throughout the lifespan of the mortgage. With this type of loan, the interest rate is called a variable interest rate.
Types of Loans
The first type can be beneficial for both first-time and existing homeowners. A conventional loan has no loan limits and offers an array of purchase, interest rate and loan repayment terms.
An FHA loan is a loan that is backed by the Federal Housing Administration (FHA). If are a first-time homebuyer and do not have a lot of cash to put up for a down payment, then this would be a good solution.
A VA Loan is backed by the United States Department of Veteran Affairs (VA) and can only be used by a veteran or active-duty military personnel.
A Rural Development loan is backed by the United States Department of Agriculture (USDA) Office of Rural Development. This type of loan promotes homeownership in rural areas. The loan accepts smaller down payments and sometimes will accept 0% down payments.
Remember that if you are in the market for a new home, your Realtor can help you with navigating the mortgage aspect. They will be able to refer you to reliable mortgage lenders who can help you with the process.
