More Americans are focused on paying off their mortgage, with almost 40% owning their home “free and clear”. If you’re looking at buying a home, this is the goal you strive for, but may not be able to achieve right off the bat.
If you can’t pay out cash in full for your home, then you’ll need to look at financing options. There are several different types of real estate loans available to you.
Keep reading to learn about the different options available to you.
1. Fixed-Rate Loan
When people talk about mortgage loans, this is the type they most often think of. You’ll have a fixed interest rate and monthly payment for the life of the loan.
Since these loans tend to have a similar structure and terms, you’ll want to compare lenders. This will ensure you pick a lender you’re going to be happy working with. You can start by reading this ING home loan review.
2. Adjustable-Rate Mortgage (ARM)
If you want to get an interest rate that is lower than a fixed-rate loan, then look into an ARM. After the agreement period, your interest rate will adjust every year to coincide with the market rate.
If your credit score isn’t great, then you have a better chance of getting a mortgage with favorable terms with an ARM. These loans are also great for people who plan to sell the home before the variable rate kicks in.
3. FHA Loan
If you don’t have at least 20% saved for your down payment, then you may want to look into an FHA loan. These loans are through the Federal Housing Administration and can require as little as 3.5% down.
Because these loans are government-backed, there are limits to how much you can borrow and the repayment term you choose. You are also required to buy mortgage insurance with this type of financing.
4. VA Loan
A Veterans Affairs (VA) loan is available to those who have served in a branch of the military and meet one of these requirements.
90 days consecutively during wartime
181 during peacetime
six years in the reserves
Since these are government-backed loans, there are strict requirements as to the type of home you can buy. It must be your primary residence, and it cannot be a “fixer-upper”.
5. Bridge Loan
Do you currently own a home and want to buy another one before selling your current house? Then a bridge loan will help you accomplish this. These loans will wrap your current and new mortgage together into one lump payment.
Then when you sell your old home, you’ll pay off the first mortgage and refinance the remaining portion. This option is best left for people with excellent credit and in need of financing for less than 80% of the combined home values.
Compare the Different Types of Real Estate Loans
The best thing you can do is compare different types of real estate loans before you decide to buy a house. This will help you go into the process fully informed of what you can afford.
Follow my blog for more tips and tricks to living your best life.