Taking out a home loan is the most common way for people to afford a home. With a variety of finance options to choose from, it's important to research these options in order to choose the one that's best for you. FHA loans, VA loans, and conventional loans each have positive aspects that appeal to future home owners. When researching these options, consider your current credit history, budget and amount of money you have to use for a downpayment.
Federal Housing Administration (FHA) Loans were created in 1934 to help people afford to buy a home. FHA loans often require a lower down payment than other types of loans.
Choose from a fixed rate or adjustable rate loan. A fixed rate loan allows you to pay the same amount each month for the life of the loan. An adjustable rate loan varies from month to month depending on federal interest rate changes. Rates for an adjustable FHA loan cannot go up more than two points during the year under current federal regulations.
If you have poor credit or are a first-time home buyer, this may be your best option when looking for a low interest loan.
Veterans Affairs (VA) loans are granted to those who have served in the military. Loans are available to military personnel who want to purchase a new home or remodel their current home. The maximum amount for a home loan is $417,000. Fixed and adjustable rate loans are available.
With low interest rates and a federal government guarantee, VA loans often cost less than conventional loans.
Conventional loans granted by banks and lending institutions, such as Freddie Mac and Fanny Mae, are not guaranteed by the federal government. This means the lender could take a huge loss if you default on the loan. To protect themselves, lenders may charge a higher interest rate or finance charges to those with poor credit. If you have poor credit, you may not qualify for a conventional loan.
For the consumer, conventional loans may require a larger down payment than other types of loans. Also, the lender can charge a higher interest rate than loans granted by federal lending institutions.
If you have good to excellent credit, a conventional loan may cost less than an FHA or VA loan. Those who have a high credit score and clean credit history are usually rewarded with low interest rates and reduced finance charges.
The maximum loan amount granted for a single family home is $417,000. Fixed and adjustable rate loans are available.