October 25th, 2018 3:06 PM by Jackie A. Graves, President
Understand the different kinds of
30-year fixed-rate loan is a good choice for many people, but it’s not the only
kind of loan available. Depending on your circumstances and goals, you might
also see if a different kind of loan might suit you better.
What to do now
Learn more about the different kinds of loans
Understand the different choices that together
make up a loan option. Our guide explains
the difference between fixed and
adjustable rates, shorter and
longer loan terms, and different loan types such as conventional or FHA.
Our guide explains how to decide what is right for you.
Get a sense for market interest rates
rates to learn a range of interest rates you may expect lenders
to offer you, and how different loan options affect rates. For example, you
might look at a 30-year, fixed-rate mortgage against a 15-year, fixed-rate
mortgage to see how the interest rates compare.
Talk to your network of advisors
Ask them what kind of loan they got, if they
would get the same kind of loan again, and why.
What to know
You can start to look at homes and explore
loan choices at the same time
You may have already started looking at homes,
or you may prefer to explore your loan choices a bit first before getting
started with home shopping. It’s up to you.
However, don’t wait until you’ve found a home
before you start thinking about your loan options. You want to have a pretty
good idea what kind of loan is right for you before you put in an offer on a
home. The action steps in this phase help you do that. Since there’s no right
or wrong time to start looking at homes, we’ve put our home shopping tips
at the end of this
Your down payment amount affects your loan
choices and your costs
Watch our short
video to learn what to consider when choosing how much to put
down. Many homebuyers choose to put less than 20 percent down. When you put
less than 20 percent down, you will likely need to pay for mortgage insurance.
Mortgage insurance adds to your loan costs, but it helps you get a loan you
might otherwise be unable to get. Mortgage insurance protects the lender if you
fall behind on your payments, which means lenders are more willing to lend to
you. Mortgage insurance doesn’t protect you or pay your mortgage for you. Learn more about
mortgage insurance and how it works.
There are multiple options for buyers with
less than a 20% down payment
Some options may be cheaper than others
depending on your specific circumstances, the local market in your area, and
changing general market conditions. Ask lenders in your area what they
recommend and why. Common options include:
A Federal Housing Administration (FHA) loan.
loan with private mortgage
insurance or a “piggyback”
For active duty servicemembers, veterans, or
surviving spouses, a VA loan.
For residents of small towns or rural
areas, a USDA loan.
There may be local down payment assistance
programs available to you
Many local areas have down payment assistance
grant funds available for first-time homebuyers with low and moderate
incomes. Learn more about
these kinds of programs.
If you’re considering a local program, ask
questions and find out whether there are any conditions you have to meet. For
example, you may need to pay the money back if you don’t live in the home for a
certain amount of time.
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