Home loan programs, which is right for you?

Update: 2020-08-04

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Home loan programs, which is right for you?

People Question #60

You have found that dream home, now which of the home loan programs is right for you?

There is no simple answer to that question; home loan programs need to be studied to choose what is best.

This all depends upon your individual family preferences and financial circumstances.

Some factors to consider when choosing from the different home loan programs. Your current financial situation, do you expect this situation to change?

How comfortable are you with a changing mortgage payment? A fixed rate mortgage can save you thousands in interest over the period of the loan, but it will also give you higher monthly mortgage rates.

An adjustable rate will start you out with lower monthly payments but you could face higher monthly payments if the rates change.

You have decided which type of loan is best for you.

Now, you need to choose which of the more popular home loan program, is the best one for you. There are many types of programs available, all with different types of loans.

Conventional loans are secured by government sponsored lenders. They are also known as government sponsored entities (GSE’s). They can be used to purchase or to refinance single family or 4 plex homes with a first or a second mortgage.

There are limits that are adjusted annually, if needed, based on the national average of new homes.

You would need to check what the current year’s limits are for an accurate amount if you were to choose this type of home loan program.

FHA loans are programs to help get into a home with a lower down payment. By protecting a mortgage company from default they encourage companies to make loans to families that may meet a lower credit guidelines.

Some of the highlights of these loans are. Lower down payments, the home down payment can be as low as 3% versus the normal 15% requirements on a conventional loan.

Closing costs of up to 2 or 3 percent of the home value can be financed, this reduces the up front money needed.

The FHA also imposes limits on the fees from the mortgage company such as the loan origination fee can not be more than 1% of the amount of the mortgage.

VA loans are available to military veterans who served on active duty and were discharged under conditions other than dishonorable.

There are eligibility requirements. If you think you may be eligible contact your local or state veterans’ administration representative.

The biggest factor in a VA loan is that no down payment is required in most cases. There are no mortgage insurance payments needed, closing costs to the buyer are also limited. You can negotiate rates with the lender and you then have a choice of payment plans with up to a 30 year loan.

The last loan program we will mention is called a subprime loan. This is a loan for people with poor credit who would not qualify for a conventional loan, VA or FHA guaranteed loan.

These loans normally will require a higher down payment and have a larger interest rate. This is because of the risk involved to the mortgage company.

These loans should normally be considered for a limited amount of time such as 2 to 4 years. It is a good way to improve your credit situation and then refinance with more favorable terms.

Finding or planning that new dream house is just the beginning of the journey into your new home.

The right answer to the question, which of the home loan programs is for you, takes research and an honest look at your personal situation.

Learn More About Mortgage Terms

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