What’s In A Home Loan?

In considering the purchase of a new home, there are several loans in which to educate yourself on. Rates will continue to rise and fall with the market, but most home loan types will remain standard per state. A loan officer at a bank or a mortgage broker can also assist you with finding the home loan that is right for you. But what is the difference between some of the key home loans available?

Below are some of the various types of home loans available for future homeowners. Some are dependent on finances, credit, home type, location, etc.

FHA Insured Loans:
The FHA (Federal Housing Administration) insured loan is an insurance backed home loan provided by a lender that the FHA must approve. This particular type of loan was derived in nineteen hundred and thirty-four, to make sure that the mortgages handed out were safely insured in case of economic turn like that of the Great Depression.

FHA loans normally require a much lower down payment, which allows for those with less money up-front to still have the ability to purchase a house. The FHA loans are also often easier to qualify for than your standard conventional loans.

Conventional Loans:
A conventional loan is not insured or secured by the United States Federal Government. It is a private loan that often requires mortgage insurance. There is a fixed principal, with an interest rate and monthly payments. Most conventional loans are thirty-year, and are actually one of the most common types of home loans available to buyers.

VA Loans:
A VA (Veterans Affairs) loan is issued by a qualified lender and guaranteed by the United States Department of Veterans Affairs. Created for American Veterans or their surviving, unmarried spouses, this loan assists these individuals that cannot get private financing. There are specific areas in which these loans are available, although when one qualifies, mortgage insurance is not required on over one hundred percent of the borrowed amount.

Balloon Loans:
A balloon loan is more of a short-term way in which to finance a the purchase of a house. A large sum is paid at the end of three, five or seven years. Smaller amounts are paid at first, in monthly increments. Then, the sum balance is paid at maturity of the loan. A balloon may have a floating or fixed rate.

Buydown Mortgages:
This type of loan allows a borrower to purchase more of a house for less money up front. This is because the interest rate starts at a lesser value initially, then increase within the first one to three years to meet your fixed rate. A lump sum is usually required for the buydown, but in return, the payment are much less to begin with.

No matter which loan you decide is right for you, it is always good to be informed of what your options may be. Whether purchasing Nacogdoches real estate or land in Florida, find an informative lender, broker or bank to help you make an informed decision. Don’t hesitate to look into several options upon deciding on one for your new home purchase.