If you’re considering purchasing a home, one thing you’ll want to look into are the various types of home loans that you might need to take out. By choosing the right home mortgage loan, you’ll be able to save yourself money in fees, down payments, and interest costs.
Here is everything you need to know about the different types of loans available.
Fixed-rate loan
This is the most common type of home mortgage loan, which has one interest rate and one monthly payment that’ll last for the entirety of the loan’s length, which will usually span between 15 and 30 years. This is best suited for someone who isn’t planning to move out of their home any time soon and for those who prefer the predictability of a continuous monthly payment. Changing interest rates won’t change your loan terms, either, so you’ll be locked into a consistent payment schedule.
Adjustable-rate mortgage
These mortgage interest rates are much lower than fixed-rate loans and last for a shorter period of time, such as between five and ten years. But after that grace period passes, the interest rates will adjust to the current rates and will continue to do so every year. This is best for people who have lower credit scores or those who aren’t planning on staying in there home for decades upon decades.
FHA loan
A Federal Housing Administration (FHA) loan will allow you to put down as low as 3.5% as a down payment compared to the typical 20% that is expected with other home mortgage loans. This is best for people who don’t have a substantial savings to cover their mortgages. FHA loans are fixed-rate loans with 15- to 30-year terms and a cap of $417,000.
VA loan
If you are a former veteran who served in the U.S. military, you are likely eligible for a VA loan instead of having to take out a conventional loan. These are available to any veterans who served for 90 consecutive days during wartime, 180 consecutive days during peacetime, or six years in the reserves. These loans have strict requirements because they come through the government.
USDA loan
This is another government-sponsored loan that is meant for families in rural areas who are struggling financially. The government covers the down payment entirely and will offer additional discounts on mortgage rates on top of that.
Bridge loan
These are also known as gap loans and are meant for people who are purchasing a home before they’ve sold their current home. Lenders will combine the existing and new mortgage payments into one bill. Once you’ve sold your home, you’ll pay off the mortgage and refinance.
