Financing Options for Buying Your First Home
Getting the financing you need on your first home can be stressful. Fortunately, there is plenty of information available on your options. Here are the three most common loans people take in order to finance their first home buys. Contact us for more information once you find a loan type that appeals to you.
Fixed Rate Loan
With a Fixed Rate Loan (FRL), the interest rate will remain constant for the life of your loan. You will be expected to make equal monthly payments until the loan is paid off. In the first few years, a portion of the payment will be used to pay off the principal. The rest will be applied to paying off the interest. FRL’s last between 10 and 30 years. 30-year loans are the most popular because they tend to offer buyers the lowest monthly payments.
Adjustable Rate Mortgage
Unlike an FRL, interest rates on adjustable-rate mortgages (ARM) can change from one year to the next. A common variation known as hybrid ARMs have both adjustable and fixed mortgage. Hybrid mortgages can have “fixed rate periods” lasting three, five, seven or ten years during which the rate will remain constant.
After that period, the loan is re-adjusted annually. Your lender may fix your interest at 4% for five years- after which time he will look up the current value of Treasury bills, add a margin to it, and fix your interest rate one year at a time based on that. There will ordinarily be a higher limit on the initial interest rate reset than on subsequent adjustments, and a limit on the how much the rate can fluctuate over the life of your loan.
The Department of Veterans Affairs (VA) does not make loans itself. But it guarantees the mortgages made by VA approved lenders. These guarantees make it possible for military veterans to access home loans with very competitive terms.
More often than not, lenders can grant these loans with no down payment, and they are easier to qualify for than other loans. VA Lenders can lend as much as $420,000 in states such as California, Hawaii and Alaska. Before you apply for a loan, see if a VA loan is right for you. If your application is accepted, you will receive a certificate of eligibility, which you will present to an appropriate lender.
In addition to these common loan types, federal, state and local authorities also offer loans and loan programs that you should look into. Many state, city, and county governments offer attractive incentives that you will not want to pass up should you qualify for them.
Speak with a mortgage agent today to find out more about home loans.