How to Choose the Right Housing Loan
February 8, 2018
Only a select few can really afford to buy a house in cash. Most people buy their homes by taking on a mortgage. They do so by getting pre-approved and only need to pay for the down payment. Choosing the right mortgage is very important as it helps you in the buying process and it greatly affects your family’s financial future. For starters, there are four kinds of housing loan you can choose from. Here’s how to choose the right housing loan.
Federal Housing Administration (FHA)
The FHA is not a lending institution, rather, it is an agency within the U.S. Department of Housing and Urban Development. They only guarantee the mortgages taken out by people looking to buy a home with low credit scores. That’s why FHA-backed loans are very popular with most mortgage borrowers. Its requirements are less stringent and the minimum down payment required is only 3.5%. People are advised to shop around though as the FHA-approved lenders have different rates.
Department of Veterans Affairs (VA)
They work the same as FHA-backed loans. Only this time, it is the U.S. Department of Veterans Affairs who guarantees the loans taken out by Military members still in active duty, Reservists, Veterans, or some select surviving Spouses based on the condition that they don’t remarry. VA loans allow the eligible and qualified members to buy a house with no down payment, no private mortgage insurance and with low-interest rates. That’s just one of the rewards for serving in the US Military.
U.S. Department of Agriculture (USDA)
They are loans for people who are looking to buy properties in rural areas and must meet the income requirements. This type of loan is designed to help foster countryside development. USDA loans, however, are not so popular with many people.
These are the private institutions – banks, credit unions, private lenders or lending institutions that lend money for people to buy their homes. Borrowers need good credit scores to qualify as the risk is greater for lenders. They typically require a minimum of 5% down payment. They have cheaper rates as compared to government-backed loans.
Choose the type of loan that you can afford to pay that helps you buy a home for you and your family. Each has its own set of advantages and disadvantages. Think about all the options you have and identify which one will best suit your needs in the long run.