Most people know what conventional mortgages are: mortgages taken out to purchase a home. But did you know that there are many other home financing options available? Did you also know that you can use a type of home financing known as a line of credit? And that it is possible to use a type of home financing called an open-end home equity loan? Read on for more information on these and other home financing options.
Traditional mortgages are probably the most common home financing product offered by lenders. Conventional mortgage loans, such as conventional banks and credit unions, usually require that you possess a decent credit score and a low debt-to-income ratio. Usually, down payments may also vary, but often you will still need separate home mortgage insurance unless you put less than 20 percent down. Another option for first-time buyers is to get an FHA or VA loan. These two different types of home financing have their own set of benefits and drawbacks.
A fixed-rate mortgage loan is a common type of home financing product. A fixed-rate mortgage loan allows you to borrow a set amount, which cannot be increased over the life of the loan (commonly, for 30 years). During the initial application process, you can opt to get a variable-rate loan. However, if you choose to change to a fixed-rate mortgage loan, your interest rate will not fluctuate. Also, if you should choose to refinance in the future, a fixed-rate mortgage loan allows you to lock in at a low interest rate.
As mentioned above, there are two different home financing options available to first-time home buyers. If you choose to use an FHA, you must supply a lender guarantee, which is not required for most borrowers. In addition, first-time home buyers can find several different ways to obtain financing from different lenders by contacting different mortgage brokers. Brokers earn a commission based on the amount that is borrowed.
Another one of the home financing options available to first-time home purchasers is to use a conventional mortgage loan. With a conventional mortgage, you purchase the home with a fixed-rate mortgage. The interest rate you receive depends solely on the market rate at the time of purchase. You can choose to finance through the conventional mortgage market, which offers competitive rates and terms, or use a specialized financing company.
For first-time home buyers who want to save money, fixed-rate mortgage loans are probably the best option. Most fixed-rate loan programs offer favorable interest rates. If you take advantage of these favorable rates, you can potentially save thousands of dollars in interest costs. However, if you do not have great credit, a conventional loan may not be the best option. Fixed rate home loans also tend to be a lot more expensive than variable-rate loans. You can use a variable-rate loan, however, to reduce the cost of your monthly payment.
Homeowners with poor credit history can obtain financing through a bank, credit union, or other third-party financing organization. A home loan obtained through a bank or credit union carries significantly higher interest rates than home loans that are obtained through other sources. Some banks and credit unions will finance home loans even for those with past bankruptcy convictions. These third-party lenders charge reasonable interest rates.
Before you start your search for financing for your new home, be sure to research all of the available options. There are a number of different types of home loans available to first time buyers, so shop around before making a final decision. Shop for the best interest rates that you can find. If you are concerned about obtaining a home loan, you should consult with a financial advisor or your local bank to see what types of home loans they are offering today. With so many different types of loans available, there is no reason why you cannot find a great deal on your new home!