Have you ever been scared about the idea of getting a loan? For a first-time home buyer in Cincinnati or Northern Kentucky, all of the types of loans can be overwhelming. However, once you know the differences and understand the qualification requirements, getting a home loan can be quick and easy. In our latest post, we work through all of the types of loans you may use!
5 Different Types of Loans You Can Use:
FHA loans are a popular choice among recent college grads, and people just starting out in the real estate world. They are appealing because they only require 3.5% down as opposed to a conventional loan which requires 20%. There are certain requirements you need to meet, such as having a credit score over 580. You can have a lower score, but this will probably result in a larger down payment. You will also need to have 2 lines of credit, open and in good standing.
The property will be subject to an inspection, and it has to be your primary residence. So, you can’t use this loan for a rental property.
Fixed Rate Mortgage:
Fixed-Rate Mortgages are the most popular type of home loan available. Typically a 20% down payment is required. A fixed-rate mortgage means your payment will be the same every month. This makes things easy, and lets you plan accordingly. If rates drop, you are locked into the rate that you have. You can refinance, but there are some costs associated. The good news right now is that rates are still at historically low levels.
A fixed rate mortgage requires that you have 3 open lines of credit, all in good standing. There are also income, and credit requirements that will need to be met.
Adjustable Rate Mortgage:
An adjustable rate mortgage is a bit riskier as your interest rate will change when the market fluctuates. These loans are great for people with some buying and selling experience. If you are a first time home buyer, make sure you do your research on an adjustable loan. If rates happen to spike, your payment could go through the roof!
VA Loans are given to Veterans and active duty members of the US Armed Forces. Members of the National Guard may also qualify once they have served for 6 years. If your spouse was killed during service, widows may also qualify for a VA loan.
There are all kinds of benefits associated with VA loans:
- Zero down payment
- Appraisal and closing fees are regulated
- Lenders do not charge private mortgage insurance or PMI
- You will need to pay a 1-time funding fee of 2% which you can finance it into the loan. Eligible borrowers can borrow up to 103.15% of the sales price or reasonable value of the home.
Overall, these loans are an excellent option for anyone who has served in the military.
THE USDA offers mortgages in rural areas of the United States. Before you dismiss this, take note that over 95% of US is eligible. These loans require zero down and have low insurance rates. You must have great credit to apply and there are strict income limits. A 4 member household cannot exceed $75,650 per yer. (And no single person can have income exceeding $49,900 per year.)
When you begin shopping for your Cincinnati or Northern Kentucky home, you should be aware of all of the resources available to you. There are grants, down payment assistance and government sponsored resources that can help you become a homeowner right now! Armed with a little bit of information, you can make the best choice for you and get the house you have always wanted!