When you purchase your next home, you will be presented with a variety of home loan options depending on your financial standing and what type of property you wish to buy. If you have a good Realtor and loan professional, you’ll benefit from their advice regarding what type of loan you option best suits your needs.
Knowledge is power when buying a home. As a buyer, it’s your job to research the best loan options for you. That’s why we’ve provided a helpful rundown of common types of home loans.
Let’s talk about the common types of home loans available to home buyers depending on their financial health and history.
What is it? This is a popular loan option for those with down payments of 20 percent or more of the purchase price. There are no limits on income, occupancy or location. These loans make up 73.8 percent of new home sales for Q1 2018, according to the U.S. Census Bureau. Compared to FHA loans, there are fewer stipulations for conventional loans. Most conventional loans are fixed rate, meaning the interest rate is maintained for the life of the 15 or 30-year loan.
Who’s it for? Conventional loans are perfect for borrowers with great credit who have saved money.
What is it? FHA loans only require 3.5 percent down payments. Guidelines for these loans are more flexible and forgiving. There are no reserves for one or two unit homes. Borrowers are required to pay private mortgage insurance (PMI). FHA loans are always fixed rate loans.
Who’s it for? This loan is best for people with small down payments and/or less-than-ideal credit.
What is it? USDA loans are for rural properties in the U.S. The government finances 100% of the loan. That means no down payment and interest rates are discounted. To qualify for a USDA loan, your debt may not exceed your income by more than 41%. Private mortgage insurance is required.
Who’s it for? For families who want to live in rural communities or are struggling financially, USDA loans are helpful. Home buyers must meet income requirements in order to qualify.
What is it? VA loans are for those who have served in the U.S. military. Those who meet the requirements do not need a down payment or have to pay mortgage insurance. There are minimum property requirements with VA loans.
Who’s it for? Veterans who have served 90 days during war time, 180 during peacetime, or a total of six years in the reserves. For those with lower credit scores, VA loans offer flexibility. Also, since no down payment is required, no savings for a home is needed.
The Bottom Line
BestMichiganHouses.com is your source for all things real estate, thanks to Bittinger Team, REALTORS. These Southeast MI Realtors lend their industry experience and knowledge to bring you important information that will help you buy your next property.
As Canton, MI Realtors, Bittinger Team, REALTORS understands the stress of buying a new home. Contact us with any questions or to begin the search for your new home.