Home Loan Variables and Options to Consider
June 10, 2024
At every stage in the home loan process, there are choices, starting with the basic decision to own your own home instead of renting someone else’s property. What other choices await you on your home loan journey? We examine some key issues below.
Interest Rate Options
No matter which type of home loan you choose, VA, FHA, USDA, or conventional, you’ll need to decide whether to apply for a fixed or adjustable mortgage.
The fixed-rate loan provides a predictable house payment for the full duration of the mortgage, and it will not change.
An adjustable-rate mortgage has an introductory period (typically at a lower rate) followed by periods of rate adjustments.
FHA adjustable-rate mortgages are easier to deal with than certain conventional mortgages as the rate adjustments for FHA loans are regulated and cannot exceed FHA limits for each adjustment.
An adjustable-rate mortgage can be an advantage in times when the rates are higher than normal.
Home Size and Use
VA and FHA mortgages allow you to buy a primary residence up to four units large as long as you or one of the borrowers obligated on the loan take residence in the house as the home address after closing time.
Conventional loans may allow you to buy an investment property to rent out to others and not use it yourself, but FHA loan rules require occupancy. You can’t use an FHA loan or other government-backed mortgages for investment purposes.
You can buy a fixer-upper with an FHA loan, you can buy a mixed-use building that meets FHA residential loan requirements, and you can apply for loans to purchase property in a condo project.
There is a different FHA loan for condos, mobile homes, and existing construction houses.
Loan Options
Did you know that FHA loans forbid the lender from charging you a penalty for early payoff of the loan? That’s a good advantage when it’s time to consider refinancing the home.
FHA refinance loan options include asking for a streamline refinance with no FHA-required credit check or appraisal.
You can also ask for an FHA Energy Efficient Mortgage add-on to the loan for approved house upgrades.
Did you know you can ask the seller to pay some of your closing costs? These are known as seller concessions, which can make your loan more affordable.
There are other choices. You can ask the lender to explain interest-only mortgages to you, graduated payment mortgages, and simple refinance terms when the time is right.
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Interest Rate Options
No matter which type of home loan you choose, VA, FHA, USDA, or conventional, you’ll need to decide whether to apply for a fixed or adjustable mortgage.
The fixed-rate loan provides a predictable house payment for the full duration of the mortgage, and it will not change.
An adjustable-rate mortgage has an introductory period (typically at a lower rate) followed by periods of rate adjustments.
FHA adjustable-rate mortgages are easier to deal with than certain conventional mortgages as the rate adjustments for FHA loans are regulated and cannot exceed FHA limits for each adjustment.
An adjustable-rate mortgage can be an advantage in times when the rates are higher than normal.
Home Size and Use
VA and FHA mortgages allow you to buy a primary residence up to four units large as long as you or one of the borrowers obligated on the loan take residence in the house as the home address after closing time.
Conventional loans may allow you to buy an investment property to rent out to others and not use it yourself, but FHA loan rules require occupancy. You can’t use an FHA loan or other government-backed mortgages for investment purposes.
You can buy a fixer-upper with an FHA loan, you can buy a mixed-use building that meets FHA residential loan requirements, and you can apply for loans to purchase property in a condo project.
There is a different FHA loan for condos, mobile homes, and existing construction houses.
Loan Options
Did you know that FHA loans forbid the lender from charging you a penalty for early payoff of the loan? That’s a good advantage when it’s time to consider refinancing the home.
FHA refinance loan options include asking for a streamline refinance with no FHA-required credit check or appraisal.
You can also ask for an FHA Energy Efficient Mortgage add-on to the loan for approved house upgrades.
Did you know you can ask the seller to pay some of your closing costs? These are known as seller concessions, which can make your loan more affordable.
There are other choices. You can ask the lender to explain interest-only mortgages to you, graduated payment mortgages, and simple refinance terms when the time is right.
------------------------------
RELATED VIDEOS:
Let's Talk About Home Equity
Understanding Your Loan Term
A Few Words About Bankruptcy
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