How to Decide Whether to Buy or Build a Home

5 Types of Loans for Homes You Should Know

Did you know that home loans have increased in popularity by 65 percent since 2020? So without a doubt, getting a home loan has never been easier than before. But, with so many different types of loans for homes and various mortgage rates, it can be a real challenge knowing which one suits your needs.

That’s why in today’s post, we’ll cover a couple of different mortgage loans you should consider to buy your dream house. Moreover, we’ll give you some advice on which one suits you the best.

1. Department of Veterans Affairs Loans

The VA loan is aimed towards veterans, service members, or their surviving spouses. This type of loan provides 100 percent financing on the value of a home, making buying or building a home a lot easier. But as you can expect, you’ll need to show a certificate of eligibility directly from the Department of Veterans Affairs.

Moreover, with a VA loan, you don’t have to make a downpayment, and the seller of the property usually covers the closing cost. Feel free to read this guide for more information about VA loans.

2. Federal Housing Administration Loan

An FHA loan is a type of mortgage loan that is insured by the U.S government and requires a lower down payment. This type of loan is perfect for people with low credit scores since payment is insured by the government. Additionally, an FHA loan is a great first-time homebuyer loan since it’s the most affordable option.

3. Jumbo Loans

This type of loan is suitable for people planning to buy a home in an area with an expensive housing market like that of San Fransisco, New York City, or Miami. As you can imagine, a jumbo loan exceeds the limits established by the Federal Housing Finance Agency. Moreover, the loan payments are quite expensive compared to other loans, so qualifying for this loan is quite difficult.

4. Fixed-Rate Loans

Perhaps the most manageable loan to apply for is the fixed-rate loan since it offers a set amount of monthly mortgage payments. But, as you already may know, these loans take years to pay off (15 to 30 years), so you should make sure that you have a stable income before applying. Moreover, some loan agencies have prepayment penalties, which means you’ll need to pay a certain fee if you pay off the loan earlier than expected.

5. Non-Conforming Loans

A non-conforming loan is a mortgage loan that doesn’t follow the FHFA regulations, which means you can get a larger loan. But, these loans are directly marketed towards people with a very bad credit score. On top of that, non-conforming loans have a high-interest fee.

Types of Loans for Homes You Should Consider

As you can see, there are several different types of loans for homes you should consider before purchasing your home. But, of course, you should carefully consider which loan you get since it’s a very important financial commitment. So, don’t wait another minute, and get a loan today!

Did you find this post helpful in choosing a loan? If so, feel free to check out our other finance-related articles before you go!