You have found that dream home, now which of the home loan programs is right for you? There is no simple answer to that question; home loan programs need to be studied to choose what is best. This all depends upon your individual family preferences and financial circumstances.
Some factors to consider when choosing from the different home loan programs. Your current financial situation, do you expect this situation to change? How comfortable are you with a changing mortgage payment? A fixed rate mortgage can save you thousands in interest over the period of the loan, but it will also give you higher monthly mortgage rates. An adjustable rate will start you out with lower monthly payments but you could face higher monthly payments if the rates change.
Conventional loans are secured by government sponsored lenders. There are limits that are adjusted annually if needed based on the national average of new homes. You would need to check what the current year's limits are for an accurate amount if you were to choose this type of home loan program.
FHA loans are programs to helping low income families become home owners. By protecting a mortgage company from default they encourage companies to make loans to families that many not meet normal credit guidelines. Some of the highlights of these loans are. Lower down payments can be as low a 3% versus the normal 10% requirements. Closing costs of up to 2 or 3 per cent of the home value can be financed, this reduces the up front money needed. The FHA also imposes limits on the fees from the mortgage company such as the loan origination fee can not be more than 1% of the amount of the mortgage.
VA loans are available to military veterans who served on active duty and were discharged under conditions other than dishonorable. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 day's active service. There are other eligibility requirements. If you think you may be eligible contact your local or state veterans' administration representative.
The biggest factor in a VA loan is that no down payment is required in most cases. There is no mortgage insurance payments needed, closing costs to the buyer are also limited.
The last loan program we will mention is called a subprime loan. This is a loan for people with poor credit who would not qualify for a conventional loan or a VA or FHA guaranteed loan. These loans normally will require a higher down payment and have a larger interest rate. The right answer to the question, which of the home loan programs is for you, takes research and a honest look at your personal situation.
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