People are usually unaware of different types of home loans available in the US due to which they sometimes fail to make an informed decision. Here we are going to share some basic and important information with you about different types of home loans that are available in the US in 2017.
What is a home loan?
A home loan is the amount of money that individuals borrow from a bank or financial institution to purchase a house. Home loans consist of fixed or adjustable payment terms and interest rate. The homebuyer promises the lender that he’ll pay back the funds within the certain time frame for a certain cost.
Basically, the possession of the home or the property belongs to the borrower but the lender owns it until it is completely paid off.
Here are some common types of home loans with some explanation so that you can make the right decision:
It is the most common type of loan. It prescribes a monthly payment and a single interest rate for the life of the loan. The duration of the loan is typically 15 or 30 years.
It’s an ideal option for homeowners who aren’t going anywhere soon. You pay a fixed amount for a fixed number of years and that’s all. The terms of your loan will not change by the rise and fall of interest rates, so you’ll always know what to expect.
This option may not be good for you if you think that you’ll move fairly soon. But it’s a good option for people who are willing to live in their home for many years.
The interest rates that are offered on these loans are typically lower than the fixed-rate loan for a period of time. After that, the rates will be adjusted according to the current interest rates. Rise and fall in the interest rates will affect your monthly payments.
It is a good choice for people who have poor credit scores. These loans are also good for those who want to move and sell their property before the end of the fixed-rate period.
You can put down as little as 3.5% with a Federal Housing Administration loan, while the down payment of 20% is required for the purchase price of your home in typical loans.
It’s a good choice for people with meager savings for a down payment. Several caveats are included in these loans. Buyers are also required to pay mortgage insurance which hovers around 1% of the cost of your loan.
A Veterans Affairs loan can be an excellent choice for you if you’ve served in the military of United States. If you qualify, you can score a sweet home with no mortgage insurance and no money down requirements.
This is a perfect option for veterans who’ve served 180 days consecutively during peacetime, 90 days during wartime, or six years in the reserves. The type of the home you can purchase must meet “minimum property requirements” and must be your primary residence.
These loans are designed for the families in rural areas. There is no down payment required because government finances 100% of the home price.
These loans will work best for families in rural areas that are struggling financially.
These are some common types of loans available in the US in 2017 that you can take from different financial institutes based on your personal needs.