Choosing The Right Mortgage Lender

If you are ready to buy a home, you should start shopping for your lender. There are several different types of loans that you can apply for, but it is important to understand the differences between them. Here are three of the most popular loans and what makes them unique to home buyers. Compare these options with your financial situation to see which one would work best for your family.

VA Loan Financing

If you are an active duty service member or retired from any branch of the military you might qualify for this loan. VA stands for veterans affairs, and this loan is meant to help more military families qualify for home ownership. It is still funded by private mortgage lenders, but the Veterans Affairs department backs it. There are other qualifications like decent credit history and some income requirements, but this loan option is only for military families. One big benefit that sets this loan apart from the others is that it doesn't require any kind of a down payment. This can be great for families who need to jump into a home and secure interest rates but haven't saved their nest egg for a down payment yet. Just like any mortgage, you want to be sure that your monthly payments are manageable so you are ready to make the commitment. If you are past or present military and don't have a down payment, this VA loan financing option might be perfect for you.

Conventional Loan

Many home buyers use a conventional loan when purchasing a home. A conventional loan will require a down payment of at least 3%, which is still pretty low! If you do not want to pay for private mortgage insurance monthly, you will need 20% down. The requirement for three percent down makes home ownership obtainable for many families. You have the extra insurance fee tacked onto your payments until you reach the full 20%, but a lot of families can afford the payment. Conventional loans require a higher credit score than other types of loan financing options. The better your credit score the better the interest rate you can secure.

FHA Loans

FHA stands for Federal Housing Association, and this means that they insure the loan. FHA loans require at least 3.5% as a down payment, but the biggest difference between conventional and FHA loans is the way PMI is handled. PMI has a fee upfront on the FHA loan and a monthly fee that has to be paid for the next 11 years. You can have slightly lower credit scores and still qualify for this type of loan. If you have a 3.5% down payment, this loan might work great for you.

Compare this information with your financial situation, and choose the loan financing that is right for you!

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