Did you know that first-time homebuyers made up around 34% of all home sales in 2021? If you are planning on buying your first house, congratulations because that is a huge step.
Buying a house is a great investment, gives you room to start a family, and gives you the freedom to make renovations. While buying your first house is exciting, figuring out the finances can be hard.
If you don’t have hundreds of thousands of dollars saved up, you will need a loan. What are some of the most common mortgage loan types? Keep reading to learn more about mortgage planning.
One of the most common types of mortgage loans is a conventional loan. While some house loans are backed by the federal government, conventional loans are issued by private lenders.
To get a conventional loan, you can talk to your bank, credit union, or a mortgage company. To qualify for a conventional loan, you will need good credit, a stable income, and down payment.
Some of the benefits of getting a conventional loan are that it can take less time to qualify, you may get a lower interest rate, and you can be more flexible.
When looking for a conventional loan, watch out for reverse mortgage scams. Some companies conduct loan scams to take advantage of first-time homebuyers.
Another one of the most common types of house loans is government loans. With a government loan, your house loan will be backed by the federal government.
Some common types of government loans include FHA loans, VA loans, and USDA loans. While these loans can take longer to qualify for, they offer more stable financing, you could get better rates, and there is less risk.
Fixed-rate mortgages are another common option that first-time homebuyers choose. Unlike most other types of mortgages, fixed-rate loans offer a fixed interest rate throughout the loan.
Having a fixed rate is beneficial because it can make it easier to plan your finances each month, and you don’t have to worry about increases.
The worst thing about fixed-rate loans is that you have to apply at the right time. If you apply when the rates are high, you won’t get a good deal.
Adjustable-rate loans are the opposite of fixed-rate loans because the interest rate can change. Most of the time, an adjustable-rate loan will have a fixed rate for a duration of time before changing.
One of the biggest benefits of an adjustable-rate loan is that you can have a lower interest rate depending on the market. The hardest thing about this type of loan is that it can be hard to plan your monthly finances.
Which Mortgage Loan Types Are Right For You?
Buying your first house is exciting, but the process can feel overwhelming. When planning for your first house, make sure you take the time to compare the different mortgage loan types.
Did you enjoy reading this article on the types of mortgage loans? If so, check out the real estate category for more tips to help you buy a house.