When looking at buying and financing a home, there are several types of loans available for you to choose from. The question is which one is right for you? Many factors come in to play to determine that. Things like credit score, current interest rates, length of time you plan to own the home are important considerations. Below are a few of the lending options available and when you might want to use them.
The fixed-rate mortgage is the most popular mortgage program in use today for financing a home. Fixed-rate loans offer the borrow a fixed interest rate for the life of the loan, typically 15 to 30 years. Borrowers have peace of mind knowing that their monthly payment will not change over time. Conventional fixed-rate mortgages have underwriting requirements established by Freddie Mac and Fannie Mae, and require certain down-payment and debt-to-equity ratios to qualify. Fixed-rate loans are especially attractive to buyers who plan to stay in their home for more than a few years.
Adjustable Rate Loans
With an Adjustable Rate Mortgage (ARM), the interest rate changes periodically, and payments go up or down accordingly. Your monthly payment may fluctuate from year to year based on interest rates. Rates are tied to an index that reflects the cost of money at any given point in time. Generally speaking, lenders charge a lower initial interest rate for the ARM than for the fixed rate mortgage. If you are expecting interest rates to decrease in the future, or if you are trying to maximize your purchase power today knowing your income will rise in the future, then this loan may be right for you. Adjustable rate loans are an attractive when financing a home if you expect to be in the home for a short period of time.
FHA and VA Loans
The Federal Housing Administration (FHA), offers loans for low-to-moderate-income home buyers. FHA loans have lower down payments, and have relatively easier requirements than conventional fixed-rate mortgages. FHA mortgages have no income restrictions and even those with lower credit scores may be considered. Past bankruptcy does not necessarily disqualify borrowers from using this program! To use an FHA loan, the home must be your primary residence and condo complexes must be FHA approved.
In addition, the Department of Veterans Affairs (VA) offers a zero-down mortgage program. To take advantage of this program, borrowers need to be among those listed as veterans and service personnel in the U.S. military. One of the biggest benefits of this program is that it eliminates the need for private mortgage insurance!
Local Homebuying Program
Summit County has local home buying programs available. These programs offer down-payment assistance and programs for first time home buyers. Deed restricted housing is also available for those that meet specific criteria for living and/or working in the county. Learn more about these local programs, recommended lenders, and other finance options by contacting us today!