Are you looking to buy your first home and need financial assistance? You are going to need to get a loan and start making a monthly mortgage payment. There are actually many types of loan available, and you may find that some work out better than others for your situation. Here are what you need to know about 3 different types of loans:
FHA loans actually have financial backing from the United State government. In addition, FHA loans typically need mortgage insurance for if you were to default on the loan and be unable to pay it back. Mortgage insurance gives the government protection against loan defaults, and the additional premium is why an FHA loan will typically cost more money than other types of loans.
The main appeal of FHA loans is that they will be accessible to all types of homeowners. The financial requirements for FHA loans are low, with you needing a credit score above 580 and a 3.5% down payment. If you have a credit score in the 500-579 range, the down payment requirement jumps up to 10%.
You can get FHA loans in either fixed rate or adjustable variations, so you can always get the type of mortgage that works best for your needs.
The eligibility requirements for a VA loans are being a veteran or a deceased veteran's spouse. Just make sure that you meet the requirements for getting the VA loan before you apply. It includes 90 days of active service during a war, 181 days of service during peacetime, or 6 years in the National Guard.
VA loans are appealing because there is not a large down payment requirement, and mortgage insurance won't be necessary. You will also find that VA loans have interest rates that are a bit lower, there is no penalty for prepayment, and the closing costs are limited.
Will your mortgage exceed what's allowed through a standard loan? This is where jumbo loans come into play. Jumbo loans are usually needed when the mortgage is greater than $417,000. The down payment is also a minimum of 20%, and it is very rare to find a fixed-rate jumbo loan so you'll need an adjustable rate mortgage. Jumbo loans also have income requirements that require that your mortgage does not exceed your 38% of what your families pre-tax income would be.
For more info on any of these 3 types of loans, speak to a mortgage broker in your area.