Buying your first home can be thrilling and daunting. Thrilling because of all the freedom and financial benefits that come with owning your own home. Daunting because of the investment and responsibility that you are taking on.
The first thing you’ll need to do as a first-time buyer is to finance your dream home. Though there are many mortgage options available, they can be confusing.
You don’t want to enter the home-buying process without knowing the types of mortgages that are available. Luckily, you’ve got this article. Here’s everything you need to know about the first-time home buyer mortgage.
Fixed-Rate and Adjustable-Rate Mortgages
One of the most important things to consider when shopping for a mortgage is what types of mortgages you should get.
Two popular options are a fixed-rate mortgage and an Adjustable-Rate Mortgage (ARM). With a fixed-rate mortgage, the interest rate doesn’t change throughout the load period, while an ARM begins with a certain rate that then adjusts periodically.
A fixed-rate mortgage is ideal if you plan to stay in one location for a long time, as it offers lower interest rates over the life of the loan and stability in your payments. An ARM, on the other hand, can offer lower rates in the short term but carries a greater risk as the interest rate can change frequently.
FHA, VA, and USDA Mortgages
FHA, VA, and USDA mortgages are government-backed types of mortgage loans that potentially offer low-interest rates, no down payment, and flexible credit requirements.
FHA loans offered by the Federal Housing Authority are tailored for people with lower credit scores and reduced income. VA loans are specifically for veterans or active military members and their families. They can be used to purchase a single-family residence and provide 100% financing. Learn more about VA loans here.
Lastly, USDA loans are available to those who meet income and credit guidelines and want to purchase a home within a qualified rural or suburban area.
PMI and Jumbo Loans
Private mortgage insurance, or PMI, is paid to protect the lender in case of default. It is typically required when the buyer doesn’t have a 20 percent down payment.
A jumbo loan is a large-sized home loan that is becoming more popular with first-time buyers because they allow buyers to purchase larger homes. Certain lenders require a better credit score and bigger down payment for jumbo loans, so it is important to review the loan requirements for various jumbo loan lenders.
To explore other mortgage types, buyers can use a refinance calculator to compare loan details and payment costs. Additionally, buyers also need to consider the loan term and type, closing costs, and mortgage rate.
With appropriate research and planning, first-time buyers can find a loan that best fits their situation.
Get Your Dream Home With These Types of Mortgages
Choosing a mortgage that best suits your needs is critical for first-time home buyers. Taking the time to understand the different types of mortgages available and understanding the costs, requirements, and restrictions associated with each can make all the difference. To make it easier, use a mortgage calculator to explore your options and make an informed decision.
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