Purchasing your dream home is one of the most significant investments you’ll ever make. While financial gurus urge you to save up for your dream home, paying for it in cash just can be impossible to do. Down payment for the house will certainly be needed, but saving that much money in a certain period is impossible. To solve that, you’ll need to apply for a mortgage. It’s the smartest financial decision you can make, but you need to choose the right mortgage type for you to succeed.
Although it may seem straightforward enough, shopping for a mortgage isn’t easy. There are many types of mortgages available, all of which pertain to specifications and components. To ensure that you apply for the mortgage, here is a quick rundown of the most popular ones:
1 - The Fixed-rate Loan
One of the most common types of mortgage is the fixed-rate loan. It follows a single interest rate and a monthly payment for the duration of the loan, which lasts from up to 30 years.
Who’s it for?
If you’re someone seeking predictability and constants, the fixed-rate loan is right for you. You will need to pay a mortgage for a certain amount of years, and once done, the house us yours. Rising and falling of interest rates won’t be affecting your home loan, making your monthly repayments constant.
2 - The Bridge Loan
Bridge loans are also called repeat financing or gap loans. They fuse current and new mortgage payments into one, which can be great if you’re looking to buy a new home before selling the previous one. You can pay off your previous mortgage and refinance once you’ve sold your previous home.
Who’s it for?
Bridge loans are great for those with good credit and don’t need to finance more than 80% of the combined value of the two homes. It can be great if you’re planning to transition between homes.
3 - The VA Loan
Veterans Affairs or VA loans can be great alternatives to conventional loans if you’re a veteran who has served in the US military. Qualifying for VA loans can usually let you acquire a home without mortgage insurance requirements or down payments.
Who’s it for?
You can qualify for a VA loan if you’ve served in the US military for 180 consecutive days during peacetime, 90 during wartime, or served in the reserves for six years. These government-funded loans usually have strict requirements.
4 - The FHA Loan
The usual home loans require a down payment of 20% of the house’s purchase price. This can be heavy for most buyers, which is the exact reason that FHA loans have become a popular choice. Through the Federal Housing Administration, you’ll be able to put a down payment of as little as 3.5%.
Who’s it for?
Individuals with not much savings for a down payment and can work with loan amount limits. The FHA usually awards up to $417,000 only, paid in either 15 or 30 years.
The Bottom Line
Before settling with a mortgage type, step back and reassess your financial situation. You will need to carefully review your needs and circumstances, as well as the type of home you can actually afford. Never skip out on research, especially when it comes to the details and components of the home-buying process. It may be a tedious process, but your dream house will be well worth it.
Now that you’re equipped with the basics, never settle for a mortgage designed to crush your dreams. Allow experts of Smith Street Homes to lend you a helping hand, dedicated to guiding you every step of the way. If you’re looking for homes for sale in Genesee County or simply wish to learn more about the home buying process, reach out to us today.