Tuesday, December 10, 2013

Loan Options for Buying a Home in 2014

By Toni Ryan, First Priority Financial

There are many home loan types to consider when seeking financing to purchase a home.  The loan you choose will have a long term effect on your financial picture so it is important that you understand your options before you commit.
• Fixed Rate Mortgages
Fixed rate mortgages are probably the most popular loan due to the fact that the payment stays the same throughout the life of the loan. Each monthly payment is comprised of a portion to pay the principle of the loan and the interest on that loan.  Many times the monthly payment can include the payment for the taxes and insurance due on the home.  The payments continue for a pre-determined time after which the home is paid off.  The most common terms are 30 year and 15 year.
• FHA Loans
An FHA loan is insured by the government so and additional insurance premium fee is included in the monthly payment and at the time of the loan funding.  These loans are attractive because the down payment requirement is 3.5% of the home value and the rates are often lower.
• FHA HECM (Reverse) Mortgages
FHA  also allows homes to be purchased using an FHA reverse mortgage as long as the borrowers are age 62 or older.  This loan allows the buyer to put approximately 30% down and have no monthly principle and interest payment as long as they live in the home as their primary residence.
• VA Loans
 These loans are like FHA in that they are insured by the government.  These programs are available to veterans who have served in the Armed Forces.  The key feature to this loan is that there is no down payment required.
• Adjustable Rate Mortgages
These loan options have a pre-determined period with a fixed interest and fixed monthly payment. These periods are usually 5, 7 or 10 years. At the end of this period, the interest can adjust based upon the market index that the loan is tied to and therefore the monthly payment can increase.  Borrowers must be cautious when entering into these loan programs but this option can be a useful tool to keep payments lower for a period of time, before which the buyer knows that they may be moving or selling.
This information is general in nature and only a licensed mortgage professional can give you the specifics that will fit your individual situation.  Knowing the options that are available is important to making one of the most important financial decisions easier.

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