LET’S DISCUSS HOME LOANS

Purchasing a home is one of life’s biggest expenses. Before your start shopping for a home, it’s important to understand the options for a mortgage if you are planning to finance the purchase. Because not all home loans are the same, understanding the options and selecting the best one for you is imperative to a smooth home buying experience.

WHAT TYPE OF MORTGAGE MIGHT BE BEST FOR ME?

• Conventional Loans are best for buyers with good credit

Pros: Can be used on a variety of property purchases, low down payment options and PMI can be eliminated when a home reaches 20% equity

Cons: Higher credit scores required and debt-to-income (DTI) ratio of no more than 43 percent - 50 percent

• Jumbo Loans require excellent credit for buyers considering an expensive home

Pros: Can borrow more money (helpful in more expensive areas) at competitive rates

Cons: Excellent credit score required

• Government-insured loans (VA, USDA, FHA) suit buyers with less down payment and potentially lower credit score

Pros: Low to no down payment and more relaxed credit score requirements

Cons: Mandatory PMI on FHA loans that cannot be canceled without refinancing, lower lending amounts in some areas

•Fixed rate mortgages are for buyers with a preference for a set monthly payment which never changes

Pros: Monthly outlay that never changes makes budgeting easier

Cons: If interest rates fall, refinancing is required for a lower rate

•Adjustable-rate mortgages are preferred by borrowers who would prefer lower payments in the short term and are comfortable with the potential of higher payments in the future.

Pros: Lower fixed rate in first years of loan, ideal if you plan to stay in a home 5-7 years

Cons: There is a risk of higher mortgage payments if you stay in your home beyond the initial lower-interest rate period

Be sure to talk to a trusted lender to learn more about each type of loan and to determine the best loan program for YOU. Check out my tips for buyers to learn more.