Buying a home is a dream come true for many Americans. It also goes without saying that it is probably the biggest purchase you are going to make in your lifetime. Therefore, such a decision needs a thorough planning. Choosing the right mortgage is the most important decision that you are going to take in the process. Therefore, it is always good to be aware of a few basic yet important things before you take the call. Here, we are going to take a look at some of the most important things that you would need to ask yourself before choosing the right mortgage option for you.
Which Type of Mortgage Loan You Should Go For?
There are two options in this regard – you can either go for a conventional loan, offered by banks and other private lending institutions or you can go for government-backed loans. Government backed loans offer you certain advantages compared to conventional loans. For example, you would need to pay little or no down payments and the interest rate would be lower in most cases. If you are looking for government backed loans, then you have three major options –
FHA Loans – Federal Housing Administration or FHA Loans are insured by the Federal Housing Administration and are established to make home-owning easier, especially for first time buyers. It allows down payments as low as 3.5% of the loan amount.
USDA Loans – The USDA Loans are backed by the Department of Agriculture of the U.S. Federal Government and are generally intended to encourage Americans buy a property in the rural America. The credit requirements are low and there is no limit on the loan amount you can get.
VA Loans – The VA Loans are guaranteed by the Department of Veteran Affairs. It comes with a whole bunch of advantages like zero down payments, no PMI and others. However, it is only available to certain eligible veterans and active duty personnel of the U.S. Armed Forces.
Now, all of these programs have their own advantages and disadvantages and you need to carefully weigh them to take the right decision. For example, to get a FHA Loan you would need to have a credit score of around 580, whereas in case of VA Loans and USDA Loans, you have no minimum credit requirement. VA Loans and USDA Loans help you to finance 100% of the price of the property, whereas FHA Loans would finance up to 96.5% of the property. USDA Loans have limited availability and you need to pay for Mortgage Insurance, plus an annual fee. VA Loans, on the other hand, doesn’t require you to pay for any mortgage insurance. Therefore, if you are a member of the US Armed Forces or a Veteran, then getting a VA Loan is the right option for you. However, it is always advised to get an expert opinion before taking any call.
Should You Go for a Fixed Rate of Interest or an Adjustable Rate of Interest?
This is another important issue that you need to decide on before taking a mortgage loan as it would play a crucial role in determining your rate of interest and the amount you are going to pay every month in interest.
If the rate of interest is fixed, then it would not change throughout the duration of the loan. You would always know what your monthly interest payment would be. So getting a fixed rate interest on your loan would be ideal for you if you don’t intend to move soon and you are settled down.
With adjustable interest rate, the rate of interest on your loan would change at regular intervals. This means that your interest rate can go up as well as it can go down in the future, depending on the markets. The interest rate typically begins at a lower level than the fixed rate, and then after regular intervals, they change based on an industry index. An Adjustable Rate Mortgage or ARM is suitable for an individual who plans to relocate soon.
If you want to take the right decision, then it is always better to get in touch with an expert. If you are interested in getting a VA Loan, then you can always get in touch with a VA Loan specialist who would guide you in the most effective way that would enable you get the maximum of the benefits you are entitled to under the VA Loan Guaranty Program.…