New to the home buying process? Curious about all of these different loan types you heard your friends and family talk about? No worries, we got you covered.? Below you will find a quick overview of the most talked about loans. Education is the key to making smart decisions, as a home buyer or mortgage shopper.
One Very Important Point First: Fixed vs. Adjustable Rate
Fixed-rate mortgage loans have the same interest rate for the entire repayment term. Because of this, the size of your monthly payment will stay the same, month after month, and year after year. It will never change.
Adjustable-rate mortgage loans (ARMs) have an interest rate that will change or “adjust” from time to time. Typically, the rate on an ARM will change every year after an initial period of remaining fixed. It is therefore referred to as a “hybrid” product. A hybrid ARM loan is one that starts off with a fixed or unchanging interest rate, before switching over to an adjustable rate.
Conventional Loans
A conventional home loan is one that is not insured or guaranteed by the federal government in any way. This distinguishes it from the three government-backed mortgage types explained below (FHA, VA and USDA)
FHA Loans
The Federal Housing Administration (FHA) mortgage insurance program is managed by the Department of Housing and Urban Development (HUD), which is a department of the federal government. FHA loans are available to all types of borrowers, not just first-time buyers. The government insures the lender against losses that might result from borrower default.
VA Loans
The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families. Similar to the FHA program, these types of mortgages are guaranteed by the federal government.
USDA / RHS Loans
The United States Department of Agriculture (USDA) offers a loan program for rural borrowers who meet certain income requirements. The program is managed by the Rural Housing Service (RHS), which is part of the Department of Agriculture. This type of mortgage loan is offered to “rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing.”
Once again, this is just a quick summary of some of the most popular mortgage loans you hear through the grapevine, social media or your friends and family.? The next move is yours?call or make an appointment with one of our experienced loan officers.? They can go into great detail about each type of mortgage loans available and, most importantly for YOU, help you choose the perfect program to get you on your way to buy your dream home.? Call Us or visit us at www.homewaymortgage.com
This information is provided to assist real estate professionals and is not an advertisement to extend consumer credit as defined by Section 226.2 of Federal Regulation Z, Truth-in-Lending. NMLS# 214884