4 Mortgages Options for Home Buyers
When planning to buy a home, it’s a good idea to learn about the various loan options available to you since a mortgage may offer some tax benefits. So before you run off to browse houses on listings, here are the mortgage options available for home buyers.
These loans are not part of any government program and are only available through private lenders like mortgage companies, banks, and credit unions. A significant disadvantage of this kind of loan is that the interest rates are in most cases higher than those of government-backed mortgages, such as FHA loans.
Jumbo loans fall outside the Federal Housing Finance Agency (FHFA) restrictions on loan sizes. And while private lenders also underwrite jumbo loans, the difference between jumbo loans and conventional loans is that jumbo loans are used to purchase expensive properties, often running into millions of dollars. They also often have more rigid requirements than conventional loans and start upwards of $647,200.
The three main types of government-insured loans are FHA, USDA, and VA loans. FHA loans are easier to get when compared to conventional loans and allow borrowers to make a down payment of as little as 3.5 percent. This program also offers borrowers insurance protection from the government via the Federal Housing Administration.
VA loans are reserved for military veterans and officials and offer up to 100 percent financing, which means borrowers can buy a house without any down payment. In addition, USDA loans offer home financing for borrowers in low-populated areas with a household income not higher than 115 percent of the area’s median income.
One advantage of a fixed-rate mortgage is that the interest rate for the entire tenure is fixed and wouldn’t fluctuate with market conditions. Most borrowers opt for the 30-year payment plan, and this is an excellent option for homeowners who want to know exactly how much they’ll be paying each month.
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