How to Select the Best Home Loan for Your Unique Financial Situation

How to Select the Best Home Loan for Your Unique Financial Situation

In order to plan for your future, you need to have all the relevant info! In order to assist you, we’ve put together a guide on how to select the best home loan for your unique financial situation.

First-time home buyer loans

The first type of loan you have available when trying to select the best home loan for your unique financial situation is a first-time buyer loan. Now, this obviously comes with a caveat that you have never owned or purchased a property before. Still, if you are just starting to figure out your finances, this is a godsend because it is a government-backed loan program through the Federal Housing Administration. What this means, in essence, is that this load is very, very lenient to get. The rates are extremely low, the credit score requirement is negligible, and you can qualify for it with pretty much any sort of regular income. The only downside are the insurance requirements, but that’s still possible to overcome!

The conforming mortgage loans

These loans are for those looking to buy a home with a relatively low to mid price. This is because conforming loans have maximum limits set by the federal government, although they do vary by area. For example, in New York City, where typical house costs are much higher, you can get a higher maximum loan amount. The ‘baseline’ limit of the loan is, currently, $647,200 for one-unit properties. Which should see you through the purchase if you know what you are looking for! Similarly, though, it’s smart to budget carefully and include things such as your moving cost estimate to know what to expect of your expenses.

The nonconforming mortgage loans

If you are looking to select the best home loan for your unique financial situation and don’t have a decent bit of cash on hand, this is not the loan for you. This is because the lenders compensate for the fact that this load does not have a set upper limit by the federal government by making it a requirement to put down larger down payments. They even ask for proof of cash reserves as a way to protect themselves from their clients immediately defaulting on the loan. Still, if you do have enough money to qualify, and look into ways to save money down the line, this can be a great way to make an expensive home purchase.

Veteran loans

If you qualify for veteran status, then you have the ability to apply for a VA home loan. There’s several reasons why veteran loans are amazing. First, credit score and income requirements are not stringent at all. Any sort of income you have, and we do mean any at all, will qualify for this assessment. Second, you might not need a down payment at all, depending on the house price. Third, VA home loans have no set limit, and the lowest fixed rates on the market, hands down. This means that you will be able to take your time repaying the loan. All without any fear of it overwhelming you. Finally, and this is huge, there is no required insurance when taking out a VA loan. Most loans require it, and it’s a major addition to your monthly expenses. You can take out multiple VA loans over your lifetime, too.

The Government-Insured U.S. Department of Agriculture Loans

As the name implies, the USDA loans are meant for low-income buyers in rural areas of the US. The amazing thing about these loans is that they require very little to qualify for them! As long as the property conforms to the USDA eligibility rules, you will only need to put down a very small down payment. The loan program is backed by the government. And its whole point is to help rural households who cannot qualify for a conventional home loan.

The conventional loans

Speaking of conventional loans or, as they are often called, mortgages, they are the final option when trying to select the best home loan for your unique financial situation. The trick about them is that they vary rather wildly in their credit and income requirements, max limits, rates, and pretty much everything else. They are issues without any government backing, and are entirely down to the individual lenders. Aka, they are customized and set by the banks themselves. In addition to everything else you need to know about borrowing from a lender, it’s good to remember that they typically ask for a larger down payment if you want to avoid being saddled by a private mortgage insurance. Both are obviously a large expense, except one is upfront and the other a monthly commitment. They also widely come in two varieties, which we will cover now.

The adjustable rate mortgages

The rates for adjustable rate mortgages have lower rates at the start. However, know that they only remain fixed for up to ten years. Past that, the rate will fluctuate based on the market’s conditions. Meaning that while it may sound great on the paper to start with, you may be saddled with ridiculous rates down the line. Still, this is a potentially great option for shorter term, smaller home loans.

The fixed rate mortgages

If you want a long-term, stable repayment plan, then the best variety of mortgage for you is the fixed-rate mortgage. It has a set repayment amount, and the rates will not change for the full lifespan of the mortgage. Note that this is a double edged sword, since if you opt for large payments over a shorter duration, and your financial situation changes, you are stuck.

Trying to find the home loan solution for your family

With everything you now know about how to select the best home loan for your unique financial situation, you should be able to make the right decision! Just keep in mind that you need to take into account your future finances as well. Do not hinge your decision on an uncertain job offer or a job you’re not sure you’ll have a couple years into the future.



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