When our parents were buying their first home, there was one way to finance the purchase. You would walk down to the corner bank and ask for a 30-year mortgage. Today the average home owner moves every 5-7 years. Depending on your needs there are a number of mortgage options you might consider, each with its own advantages and disadvantages, spending some time to understand the options is the best way to choose the right loan for your needs.
While loan programs and terms vary, the most common are:
- Conventional – A conventional loan is normally still designed to be paid off in 30 years with equal monthly payments during the term of the loan. There are currently conventional loans that require as little as 5% down, although 20-25% is still commonplace.
- FHA – An FHA loan is guaranteed by the Federal Housing Administration and is attractive for a number of reasons, especially for the first time home buyer. The down payment can be as little as 3.5% and that can be a gift.
- VA – VA (Veteran Affairs) is a loan program offered for Veterans and their spouses. While the terms can vary from 0-5% down payment, this loan may allow the borrower to finance as much as 100% of the home’s value in the loan.
Your lender will also have more specialized options for you, such as adjustable-rate loans and 10 or 15-year loans. They can also explain the additional costs that could be associated with each type of loan program.
Part of purchasing a home is to find the right financing. Your lender will talk you through your options. If you have not already spoken to a lender, or if you need a referral, your real estate agent is a great resource for you.