6 Types of loans for the first time home buyer

6 Types of loans for the first time home buyer

Owning a home is like fulfilling one of the biggest dreams in your life. If you want to buy your first home, you can apply for a home mortgage loan. There are many types of home loans that are offered for the first time home buyers. You can save a lot of your hard-earned money, if you have sufficient knowledge about the different types of home loans and their terms and conditions.

Type of loans for the first time home buyers

The different types of loans that a first time home buyer can take advantage of are:

1. FHA loans: If you have a low credit score and cannot afford to pay 20% down payment, you can take advantage of the loan offered by the Federal Housing Authority. The FHA does not directly offer you the loan, but, it gives guarantee of repayment to the lenders, in case you fail to repay the loan; so the lenders keep lower requirement criteria to get you approved for this loan. The loan terms range from 10 to 30 years. You can either opt for fixed rate mortgage or an adjustable-rate mortgage.

2. FHA HUD loans: You can take this type of loan if you want to buy an FHA foreclosure home. This program offers you to put a minimum down payment, which can be as low as $100, a small amount of repair escrow account, if the home needs to repair and closing cost assistance upto $2,500. The loan term ranges from 10 to 30 years. It is a fixed rate mortgage.

3. VA loans: You can take this type of loan if you are a military veteran. You do not need to put any down payment and the interest rate will be 1% less than the current market rate. The loan term ranges from 10 to 30 years. You have to pay a 1% funding fee during the closing of the loan process. The insurance and property taxes are factored into an escrow account, so that your monthly repayment will be according to your affordability.

4. Conventional loans: If you have an excellent credit score, you can go for the conventional types of home loans. You need to make a 20% down payment, and if your credit report is very good you can get a lower interest rate.

The 2 most common conventional loans are:

o Fixed rate mortgage: Here, the interest rate remains fixed for the entire loan term. The loan term ranges from 5 to 30 years, though, the most popular loan terms are 15-year and 30-year. For the 30-year loan term, the interest rate is lower than that of the 15-year.

o Adjustable-rate mortgage: In this type of loan, the interest rate is lower and remains fixed initially for a fixed time, after that it fluctuates according to the market index. The initial fixed period can be between months to 5 or 7 years. At the time of taking the loan, you have to specify the initial period.

Apart from these two, there are many other conventional loans, like, hybrid mortgage, balloon mortgage, bridge mortgage, etc.

5. SPARC: It is a low interest loan provided by the Sponsoring Partnership and Revitalizing Communities, through the non profit organisations, local government, housing authorities, etc. These organisations combine different types of loans offered by the state, local and federal government and offer them to the first time home buyers.

6. USDA loans: You can take advantage of this type of loan if you stay in a rural or a town area, where the population is less than 10,000. You will get 102% financing on your home. You do not have to make any down payment and there will be no monthly fee towards mortgage insurance. The loan term will range from 15 to 30 years. However, the interest rate can be 1% higher than the current market rate.

You need to keep in mind that, along with the down payment, you also need to pay for the origination fees, closing costs, appraisal costs, title transfer fees, etc. You should select a loan, whose interest rate and terms and conditions best suits your affordability.

Recommended Sites :

Oakland Real Estate : Complete MLS, real estate tools, homeowner resources and local neighborhood expertise to help you purchase real estate in Oakland, Berkeley and Piedmont

Lake Havasu City Real Estate:Contact Reinhard Realty for all Lake Havasu City real estate, home search, mortgage and relocation tips and events in the area.