Loan Options
Understand the different loan types to figure out which ones might be right for you.
CONVENTIONAL FIXED-RATE MORTGAGES
A conventional loan maintains a fixed principal and interest payment throughout the entire life of the loan. (Any change in monthly loan payments will be due to increases in other charges like property insurance or property taxes that naturally occur over time.) A Fixed-Rate Mortgage Loan may be a good choice if you want the security of knowing your interest rate will not change and if you plan to stay in the home for several years. Terms of 10, 15, 20 and 30 years are available. In determining the length of your loan, you want to consider the amount of payment you can afford and the total interest you will pay over the life of the loan.
ADJUSTABLE RATE
An Adjustable-Rate Mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. Generally, the initial interest rate is lower than that of a comparable fixed-rate mortgage. After that period ends, interest rates — and your monthly payments — can go lower or higher.
An Adjustable-Rate Mortgage may be a good choice if you:
- Want to maximize your buying power
- Want to keep your payments lower during the first few years of your loan
- Plan to move into a different home within the next ten years
- Plan to pay-off your mortgage within the next ten years
- Expect your income to increase significantly in the next few years
GOVERNMENT BACKED LOANS (FHA, USDA)
FHA Loans
Backed by the Federal Housing Administration, FHA loans are mortgage loans that have lower down payment and credit requirements, making them accessible to more people. Depending on where you live, you can get an FHA loan with as little as 3.5% down. The downside of an FHA loan is that you’re required to pay an upfront mortgage insurance premium equal to 1.75% of your total loan value, followed by monthly mortgage insurance payments. Depending on the size of your down payment, you may be paying monthly mortgage insurance for the life of your loan.
USDA Loans
USDA loans are government-backed loans that can help you buy a home in a suburban or rural area. USDA loans don’t require a down payment with a qualifying credit score. The home you want to buy must also be in an eligible rural area; you can check your potential home’s eligibility on the USDA website.
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