Buying a home has long been considered a cornerstone of the American dream. Whether it's your first, or one of many, getting a home loan to purchase a home is one of the most significant financial decisions you’ll make in your life. Many people decide to buy because of the benefits associated with home ownership.
If you want to make that first step toward home ownership, there are several ways to obtain a home loan. It may take time to understand the different home loans and which one is right for your financial situation; that’s why it’s important to work with a licensed loan professional who can walk you through your various options.
Fixed Rate – Provides the homeowner with a fixed interest rate and payment throughout the life of the loan, as opposed to an adjustable rate.
VA Loan – Offers long-term financing to eligible American veterans, and is guaranteed by the U.S. Department of Veterans Affairs (VA). It can be obtained without a down payment and doesn’t require private mortgage insurance.
FHA Loan – Insured by the Federal Housing Administration (FHA), this loan gives the flexibility of buying a home with a lower down payment and credit score.
Adjustable Rate Mortgage – A loan with an interest rate that changes. There is an initial period where the rate is fixed, after which, the interest rate adjusts according to the market and loan terms.
Jumbo Loan – Exceeds the loan limit set by Freddie Mac and Fannie Mae. Typically, in most counties the Jumbo Loan limit is $424,100 but in some areas due to higher home prices, that limit is $637,150.
Home Improvement – A loan that’s used for home renovation.
Reverse Mortgage – A loan for homeowners who are 62 years or older, enabling them to convert a portion of their home’s equity into cash.
Interest-Only Loan – A borrower has the option to only make monthly interest payments due on a mortgage for a preset term, which is usually between 5 to 7 years.
Turning the dream of home ownership into a reality requires preparation. Part of that preparation is finding out how much house you can afford to buy.