Types of Loans and How to Qualify

When it comes to loans, home buyers are not without options. So, if you are a buyer, how can you know what option is right for you? Well, the first thing that you should know is that there are three main types of loans: Conventional, FHA, and VA loans. Here's an overview of each one:

Conventional Loan
This is the most common form of loan, where a private organization lends to a borrower, with interest. Lenders usually require a 20% down payment on the home before they will lend the remaining amount. However, there are also some conventional loan programs available with only 10% down. Qualifications for loans vary extensively from one lender to the next. Most loans are fixed-rate, meaning your monthly payments remain the same regardless of the market. An alternative type of loan is an Adjustable Rate Mortgage (ARM), where initial payments may be less but the rates change with market flocculation.

FHA (Federal Housing Administration) Loan
This is a governmentally backed loan requiring a much lower down payment than a conventional loan. Currently, the minimum down payment for a FHA loan is 3.5% of the purchase price. In order to obtain this loan a person must have good credit. To find out more about credit requirements for an FHA loan, speak to one of our preferred loan officers here: LINK TO PREFERRED PARTNERS.

VA (Veteran’s Administration) Loan
This low interest rate loan is for veterans, as well as active or reserve military personnel. In some situations the spouse of someone in the military can also obtain this loan. It often requires no down payment. Under most circumstances an eligible person can only receive one of these loans. To lean more, visit http://www.valoans.com.

40 seconds left. Here are some other facts about loans you should know:

Private Mortgage Insurance (PMI)
Lenders consider you a high-risk investment if you put down less than 20% on your home. In this case, they will require you to purchase Private Mortgage Insurance. This does not protect you from anything, but it does cover some of the lender’s losses in the event that you default on the loan. The PMI fees will be included in your monthly mortgage payments. The good news is, once you have paid 20% of the home cost, you no longer have to pay for PMI.

Down Payments
As a general rule, if you can pay at least 20% down, you can get the best available rates. You become a lower risk investment to the lenders, who will be willing to charge you lower interest rates.

For a less speedy and more detailed course on loans we highly recommend you find a loan officer that you can trust. They can help you navigate this tricky realm and get a loan which best suites your particular needs.