Loan Options

Looking through these loan options, the kind of mortgage you choose has a big impact on how much you end up paying—how much you’ll have to pay upfront, your monthly payment amount, and the total cost of your loan over time. It also affects the level of risk you take on. Knowing what kind of loan is most appropriate for your situation prepares you for talking to lenders and getting the best deal. These loan options will help filter down to the right loan for you.

Conventional loan options can be fixed-rate mortgages, adjustable-rate mortgages, balloon mortgages, or hybrid loans. Almost any type of loan that you take, if not issued by a government entity, is considered a conventional loan.

An FHA loan option is a mortgage loan that is insured by the Federal Housing Administration (FHA). Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments.]

VA loan options are home loans for the purchase of a primary residence available to consumers who have served or are presently serving in the U.S. military. While the Department of Veterans Affairs (VA) does not lend money for VA loans, it backs loans made by private lenders (banks, savings and loans, or mortgage companies) to veterans who qualify.  Those who are eligible include: Veterans, Active-duty personnel, Reservists/National Guard members and some surviving spouses.

Jumbo mortgages are home loans that exceed conforming loan limits. A jumbo loan is one way to buy a high-priced or luxury home. If you have a lower debt-to-income ratio, a higher credit score, and a larger down payment, a jumbo loan may be right for you.  The limit on conforming loans is $417,000 in most areas of the country, but jumbo mortgages can exceed these limits.

Reverse mortgages have become the cash-strapped homeowner’s financial planning tool of choice.  Introduced in 1989, such loans enable seniors age 62 and older to access a portion of their home equity without having to move.  The bank makes payments to the borrower throughout his or her lifetime based on a percentage of accumulated home equity. The loan balance does not have to be repaid until the borrower dies, sells the home, permanently moves out or the loan becomes due if the consumer does not comply with loan terms.

If you have built some solid equity in your home, a home equity loan option lets you exchange a part of this equity for cash. A lot of people use this cash loan to make home repairs, upgrades, pay for college tuition and other expenses. It’s really up to you.  However you decide to use your home equity money, you can usually deduct the interest. That’s a pretty appealing reason to finally buy those big-ticket items you’ve been wanting. Home equity loans are also a good option if you face high medical bills or some other emergency.

Construction loan options for new-built homes are either obtained by the homebuilder or prospective owner. Such loans, which can be tough to get without a previous banking history because of the lack of collateral (a finished home), have special guidelines and include monitoring to ensure timely completion so your repayment can begin promptly.

In 1991 the U.S. Department of Agriculture (USDA) started offering rural development loans to encourage homebuyers to live in rural and suburban areas. The USDA did this to promote growth and boost the local economies of these areas by making land and property more affordable.  For borrowers that meet USDA loan requirements, they offer many benefits paired with relatively lenient approval requirements. So if you want to live in a suburban or rural area – generally with a population of 20,000 or less then a USDA loan options may be your answer to owning your new home.

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