The decision to purchase a house of your own comes with many risks and considerations. While it can be a tedious journey, especially financially, many institutions are willing to help you out. You just need to find the right one with the ideal terms and conditions.
If you are a first-time homebuyer, you have many loan options to choose from. The only challenge is finding which among these options is perfect to meet your needs. In this article, we will present some choices and what makes them good. Hopefully, this article will enlighten you and help you decide which you should choose.
The Conventional Home Loan
All loan options that do not have to do with the federal government are considered conventional home loans. They are offered by private lenders like banks and credit unions. They usually have stricter requirements, but the benefits are less expensive than what you would get from the federal government.
Conforming Loans
These are loans provided by organizations like Freddie Mac and Fannie Mae. While the government does not back them, they still comply with their set limitations, such as the maximum loan allowed and other guidelines. They are usually preferred because of their low interest rate.
Non-Conforming Loans
Opposite of the conforming loans are the non-conforming loans, which do not meet Freddie and Fannie’s standards. They do not adhere to government guidelines. Therefore, the properties bought under this cannot be resold to agencies.
Compared to conforming loans, they usually have higher interest rates. Some common examples of this loan are the FHA, VA, and USDA loans.
Federal Housing Administration (FHA) Loans
As a first-time homebuyer, you should consider getting an FHA loan first. Depending on your credit score, an FHA loan can allow you to purchase a house with a down payment as low as 3.5 percent, unlike the usual 20 percent requirement.
It is also not too strict when it comes to credit scores, allowing people with scores of 580 and higher to apply. If you have a 500 to 579 credit score, you can still apply as long as you can provide a 10 percent down payment.
US Department of Agriculture (USDA) Loan
This loan option does not require any down payment and offers a low mortgage insurance rate, so long as you meet the US Department of Agriculture’s guidelines. The program is specially designed for families with economic needs and an adjusted gross income of not more than 115 percent of the median income of their area.
It is the best option if you want a loan with cheaper upfront costs and payments in the long run.
Veteran Affairs (VA) Home Loan
You are eligible to apply for the VA home loan if you are inactive duty, a veteran, or the immediate relative of a deceased veteran. This offer is backed by the US Department of Veteran Affairs and enables first-time homebuyers to purchase a home with little to no down payment and no mortgage insurance.
Conclusion
Private or government lenders do their best to develop programs that can help US citizens acquire a home they can call their own. However, it will always be helpful to consult with someone knowledgeable in the industry who can help you determine and find the appropriate financing for you.
If you need help deciding about home loans in Los Angeles you choose, Shannon Christenot, your premier mortgage broker, can help you. Contact us at (818) 601-2231 for more information, or send us an email to get your free mortgage rate quote.
