Odds are, one of the first things you will do after getting an accepted offer on your new home, is nailing down how you will be paying for it! Below are listed the most popular types of home loans which will guide you in finding the one that is right for you.
A fixed-rate loan is the most common type of loan which is especially true when interest rates are low. It guarantees that your payments will not change when the rates rise and fall, so you will always know what to expect. It is perfect for people who want to simplify the loan-payment process and who love predictability. Be advised however, it is a loan that is best suited for someone who plans to stay put for the majority of their loan time frame, so as to overall come out ahead.
An adjustable-rate mortgage or ARM is ideal for someone who is not looking to make any long-term living commitments in their home. Typically, this type of loan will offer a lower rate than what you could expect from a fixed-rate loan but only for a period of time. This time frame typically ends at the 5 or 10 year mark and then rates will ebb and flow with the corresponding current interest rates. This could be a gamble. You could come out ahead if rates are low, however, if they shoot up, so do your payments.
An FHA loan or Federal Housing Administration Loan is a great option for those who do not have a ton to put down as an initial down payment. Conventional loans typically require you to put down 20%, but an FHA loan can require as little as 3.5%. One downside to these loans however, is that they do not provide much flexibility. Rates are usually fixed, with either 15 or 30 year terms. Buyers are also required to pay mortgage insurance which can be around 1% of the overall loan cost.
A VA loan is a great option for those who have served 90 days consecutively during wartime, 180 during peacetime or 6 years in the reserves. VA, or Veterans Affairs loan, for those who qualify can purchase a home with no money down and with no mortgage insurance requirements. One catch however, is that the home you purchase must be your primary residence and can not be a fixer upper or investment property.
This loan is targeted towards those living in rural development or areas. In this instance, the government helps out by financing 100% of the home price, which means no down payment necessary and on top of that, offers discounted interested rates. It is mainly targeted towards families living in rural areas who are also struggling financially. The USDA loan helps by putting home ownership in their grasp.
A Bridge loan is excellent for so many who are transitioning from one home to the next and find themselves needing financing for two homes at the same time. In this instance, lenders can wrap your current and new mortgage into one payment, and once your home is sold, you can pay-off that mortgage and refinance. In order to do a bridge loan, you must have excellent credit and a low debt-to-income ratio. These homeowners also must make sure that the two homes combined do not exceed 80% of the two homes’ combined value.
For Wisconsin residents, a WHEDA loan, (Wisconsin Housing and Economic Development Authority), may be a viable option as well. It is targeted towards those who live in the state of WI and feel as though purchasing a home might be just out of reach. There are several loans to choose from, however, there are certain criteria you need to meet in order to be considered eligible. First, the home must be purchased in the state of Wisconsin. Second, there are strict WHEDA income limits that vary from County to County, so checking that in the County you are locating to will be one of your first steps. Be aware, that the income limit is the TOTAL income of all residents living in the home, regardless of who is applying for the loan or not. Other requirements include taking home-buying education and counseling prior to closing, as well as making the new home your primary residence. In addition to this, there are other minor considerations to keep in mind, for further information, click HERE.
There are so many details to keep track of when purchasing a new home! Hopefully, becoming familiar with all of your loan options can simplify things a bit. The more you research, the more likely you are to find the right fit for you! Happy home hunting!