Choosing the right home loan is equally important as choosing the perfect home. But how do you know the right home loan for you? Here is an in-depth guide to the four primary types of home loans available. You can contact a professional at a bank like MainSource Bank for more information about which one is right for you.
1. FHA Loan
If you don’t have sufficient funds, you may want to consider the Federal Housing Administration loan (FHA loan). FHA loans are designed for low and medium income individuals who would otherwise not be able to acquire any house on the market because of their subpar credit. One has to have a minimum qualifying credit of 580.
Additionally, FHA loans qualify you for a mortgage with an initial deposit of less than 3.5 percent. Further, the loans are issued by the government and thus assure the lender that his money will not be lost suppose a borrower defaults.
2. VA Loans
This type of loan is called the United States Department of Veterans Affair Loan program. The credit was first introduced in 1944 GI bill. The loan allows retired and active military personnel buy a home with zero deposit and zero mortgage insurance premium. Also, VA loans feature incredible interest rates.
But, the requirements are a bit strict. Lenders approve individuals with a credit score of 620 and above. Also, each VA purchase loan needs its appraisal that includes a close examination of the house and the property valuation.
3. USDA Rural Housing Loan
A USDA loan is also a government-issued home mortgage. The United States Department of Agriculture Rural Development offers this loan in places with small populations of up to 10,000. The program is meant for low-income buyers. The deposits on homes can be as low as 0 percent.
4. Jumbo Loan
If you dwell in an area with expensive housing market, you may want to consider the jumbo loan. This type of loan is higher than the government-issued mortgage loans. In most areas, this means loans of more than $400,000. Areas with extreme cost of living such as San Francisco have high thresholds of $625,000 and more.
Take into account: since the amount of money you wish to borrow may be too large, jumbo loans compel home buyers to pay a hefty down-payment—around 30 percent of some lenders and a credit score of at least 680.
These home loans can be a great help, and each of them has its features tailored specifically to a particular group. The right type of home loan for you will depend on your credit score, the amount of down payment you can pay, and the area you live.