By Gene DiPaulaMar 23, 2016
Recently, we discussed the first step in the home purchase process: getting pre-qualified. Getting pre-qualified allows you to enter the home buying process prepared, with a budget in mind. Once you’ve been pre-qualified, the second step in the home buying process is to choose your mortgage loan type.
Fixed-Rate vs. Adjustable-Rate
Mortgage loans are split into two types: fixed-rate and adjustable-rate. A fixed-rate mortgage has the same interest rate for the length of the mortgage term. Fixed-rate mortgages are usually available in either 15- or 30-year terms. The 30-year fixed rate mortgage is the most common type of mortgage.
An adjustable-rate mortgage has an interest rate that is usually fixed for a set period of time, and then periodically adjusted according to a specific benchmark. Many factors determine how the interest rate changes, including market conditions, financial index, etc.
Whether you should choose a fixed-rate or adjustable-rate mortgage depends on your personal financial situation, how long you plan to live in your home, how quickly you plan on paying your mortgage back, and many other factors. Your loan originator can help you determine which type will work best for you.
Once you have chosen the type of rate that is best for you, you can choose a loan program. Some of the most common loan programs are:
- Agency Conforming Loans: Fixed, adjustable, and interest only loans available; great for nearly every borrower. Minimum 620 FICO (up to 97% LTV).
- FHA Loans: A great choice for first time homebuyers, buyers with little down payment, or with less-than-perfect credit. Below 620 and down to 580 FICO’s.
- Veterans Administration (VA) Loans: Perfect for active and reserve military; spouses may also qualify. Below 620 and down to 580 FICO’s.
- 203k Renovation Loans: Great financing choice for those buying a home in need of renovation. Minimum 620 FICO.
- USDA Loans: Great financing choice for homes within development areas. Borrowers can receive up to 100% financing. Minimum 620 FICO.
- The HomeStyle Renovation Loan: Allows the borrower to purchase a new home and make renovations, repairs, or improvements totaling 50% of the as-completed value of the property with a first mortgage.
For a more comprehensive list of loans and their requirements, contact your mortgage loan originator.
According to Gladys Marcelin, NFM Lending Georgia Branch Manager, the most important factors to take into consideration when choosing a loan program are your credit, your income stability, and your available assets. Your loan originator can work with you to choose the loan program that best suits your needs and financial situation.
In addition to working with a knowledgeable professional, educating yourself on the mortgage process is important, especially as a first-time homebuyer. Gladys recommends attending a homebuyers’ seminar, especially if you are a first-time homebuyer, to learn more about home loans and buying a home.
“Buying a home can be a tedious process, but it can also be rewarding and is a great accomplishment,” says Gladys.
These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact us.