If you are interested in owning a home or if you already own a home, you should definitely be well-versed in the types of home loans that are available to you. The more you know about the home loan options that are available to you, the better suited you are to make the right decision. Knowledge is power when you are looking into financing, which is why we’ve prepared the following article that details the different type of home loans that you can choose from. If you are looking for a loan to purchase the home of your dreams, reach out to All American Financial Services today. We can help you secure a loan based on your individual needs and walk you through everything you need to know to make a great decision.
A conventional loan is a loan that is not backed by a government entity. It’s a loan that typically requires a minimum of a 20% down payment or equity in the home. The conventional loan is perfect for home investors that have great credit and a good debt-to-income ratio. People that pursue the conventional loan should be ready to bring a nice amount of cash to the closing. It can be easy to qualify for a conventional loan, but if your credit score isn’t great you will likely receive high-interest rates.
Fixed-Rate Mortgage Loan
A fixed-rate mortgage loan is an option that locks you into the same interest rate for the duration of the loan. That means that the monthly payment on the home will never change until it is paid off. It’s worth noting that the interest rates for fixed-rate mortgage loans are normally higher than adjustable-rate loans. The benefit of this type of loan is that you won’t have to worry about interest rate hikes at a later date since your interest rate is locked in.
Adjustable-Rate Mortgage Loans
This is an interesting option for buying a home that involves a fluctuating interest rate that is based on market interest rates. These loans will typically start off with a low-interest rate so that people can easily afford the payments. However, it’s possible that the owner won’t be able to make the payments later on down the road if the interest rates go up significantly.
There is a special option out there for rural borrowers that have a steady income but can’t obtain a loan through the traditional financing options. The U.S. Department of Agriculture loan helps people living in rural areas become homeowners through a loan program backed by the Rural Housing Service.
These are some of the most common types of home loans that are available. If you have any questions about obtaining a home loan or would like to hear which financing option might be best for you, reach out to All American Financial Services today.