One of the most important parts of the 21st century is a loan. It is a tool which enables us to fulfill those needs which require huge expenditure such as buying a house. Many of us rarely have enough savings to make such purchases on our own.
Home Loans allow us to purchase our dream home without worrying about the huge sticker price that comes along with it. Further, houses are one of those assets that will keep on getting pricier; whatever they cost today, it will be a lot more couple of years later.
All the more to reason to buy one at the earliest, isn’t it? This is why many people are going ahead and purchasing a residential estate with the help of mortgages. However, there are many loan options available which often confuses the masses.
If you are someone who knows squat about residential loans but want to choose the best one, then you are at the right place. Let’s understand the available options and figure out which one will best suit your needs. Let’s begin then, shall we?
• FHA Loans
Some loans are offered by Federal Housing Administration (FHA) through FHA-approved lenders. They are backed by FHA which means that even if you default on the mortgages, FHA will pay the lender. This eliminates the risk from the mix, which is why lenders easily offer these loans.
The good thing about FHA loans is that they require minimal down payment of just 3.5%, and the interest rate is lower than the market rate. Also, they are easy to qualify as your credit score just needs to be over 580. In case it is 500-579, you can still qualify by making a 10% down payment.
If you are someone with less than stellar credit and limited savings, then this really is one heck of an option!
• VA Loans
The Department of Veterans Affair (VA) also offer loans to former and active members or to the spouse of a member who died or got injured while on service. Just like FHA Loans, these are insured by Department of Veterans Affair and offered by VA-approved lenders.
What makes these loans desirable is the fact that they can be availed without making any down payment at all, as the loan-to-value ratio goes up to 100%. This means that the borrower doesn’t need to spend a dime to purchase a home.
In case you do not want to break the bank or have no savings at all, then this is one of the best bets for you! Of course, you will have to be eligible in order to secure the loan.
• USDA/RD Loans
United States Department of Agriculture and Rural Development (USDA/RD) also provides Residential Property Loan Services to the people who are interested in buying a house in the suburbs. The loan is granted by a USDA-approved lender and backed by USDA itself.
The added benefit of choosing this loan type is the interest rate it offers which could be as low as 1% (depending on region). Also, it is a zero down payment loan which means you can get a loan on the complete amount!
If you want your home to be away from the hustle and bustle of the city, then a USDA Loan can be the way to go about it. Not only the debt will be cheap, but also you can have total peace of mind while living in a beautiful area.
• Conventional Loans
Unlike the earlier alternatives, Conventional Loans are not secured by any government agency such as FHA, VA, or USDA. They include the following types: -
- Fixed Rate Mortgage (FRM) – On the basis of interest rate, there are two types of mortgages – Fixed Rate Mortgage or Adjustable Rate Mortgage. In FRM, the interest rate does not change over the course of the loan. This means that your mortgages will remain indifferent to any fluctuations in the market. This could be a good choice if you are planning to stay in your new home for the longer haul.
- Adjustable Rate Mortgage (ARM) – ARM is totally opposite of FRM. Honest to its name, the interest rate keeps on changing as per the market conditions. However, many lenders offer a fixed rate for the initial years which is lower than the market rate. It is advisable to consider this option if the rates are likely to fall or if you are going to stay in the new house for a short time.
- Jumbo Mortgage – If the amount of loan exceeds the set limit of Fannie Mae or Freddie Mac (GSE or Government Sponsored Enterprise), then the loan is considered as a Jumbo Loan. These loans cannot be sold, guaranteed, or securitized which makes them a bit risky for the lenders. But if your dream home costs a little more than the average house, then a Jumbo Loan can help you to own it.
This was all about finding out which Home Loans best suit your needs. The fact that there are so many options available means there that is a type of loan available for everyone who needs one! If you are looking for a residential property loan provider in Rancho Cucamonga, then you can contact us for a consultation and commitment-free quote.
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