Which Home Financing Option is Best for You?

Posted on 12 June, 2020

For potential homebuyers researching the real estate market, there’s a good chance they’ll need to research home finance rates as well. Where you live, how long you plan on staying there, and other factors can make some home financing rates and mortgage rates better suited to someone’s circumstances.

Many types of Mortgage rates and loans exist, such as conventional loans, FHA loans, VA loans, jumbo loans, and fixed-rate loans. Each type of loan may require certain down payments or standards for loan amount, interest, and the Best Homeowners Insurance available. To better understand real estate financing and to find the best kind of loan, read on for more information.

Fixed-Rate Loan

The most common type of conventional loan, this option prescribes a single interest rate–and monthly payment–for the life of the home loan, which is typically 15 or 30 years in total. One kind of fixed-rate mortgage is a jumbo loan.

Homeowners who are looking for a loan that’s predictable and won’t be moving anytime soon can benefit the best from this loan. For a mortgage payment, the homebuyer pays a certain amount for a scheduled length of time. A fixed-rate loan will require a down payment. The rise and fall of interest rates won’t change the terms of the home loan, so homeowners will always know what to expect with their monthly payment.

Adjustable-Rate Mortgage

Unlike fixed-rate mortgages, an adjustable-rate mortgage (ARM) offers interest rates usually lower than you’d get with a fixed-rate mortgage for a certain period of time. But after that period, the interest rates and monthly payments will adjust, usually every 12 months.

This kind of loan is right for homebuyers with lower credit scores. Since people with less-than-perfect credit can’t usually get good rates on fixed-rate loans, an adjustable-rate mortgage can move those interest rates down to a point where homeownership is attainable.

VA Loan

For those who have served in the military, a Veterans Affair or VA loan can be a top choice alternative to a conventional loan. If someone qualifies for a VA loan, they can get a house for no down payment and no mortgage insurance requirements.

VA loans are for veterans who’ve served at least 90 days consecutively during wartime, 180 days during peacetime, or six years in the reserves. Because the home loans are backed by the federal government, the VA has very strict requirements on the type of home buyers can purchase with a loan, such as not buying fixer-uppers for personal gain.

FHA Loan

With a typical home loan, a down payment of 20% is required. But for FHA (Federal Housing Administration) loans, potential buyers can put down as little as 3.5% because these loans are backed by the Federal Housing Administration. This kind of loan is perfect for buyers with little to no savings for a down payment. The FHA has a number of requirements for mortgage loans and has limitations put on them, such as not buying a home past a certain dollar amount.

FHA loans are fixed-rate with either 15- or 30-year terms. Buyers of FHA-approved loans are also required to pay mortgage insurance which usually costs about 1% of the entire loan amount.

About Byrnes Agency

At Byrnes Agency, we offer insurance solutions that can be tailored to meet your specific needs. Whether you’re looking for personal policies or commercial coverage, we have the right coverage for you. To learn more about our products, contact us today at one of our two locations.

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