What Type Of Home Loan Is Right For You/
Many home buyers are unaware of the choices available to them when it comes to home loans.
Many potential buyers sit on the fence because they don’t think they can qualify for a home due to their credit rating, or the fact that they might not have the 20% down to get a conventional mortgage. The good news is, there are many ways to qualify for a loan, even if you don’t have the best credit score or a whole lot of cash.
Let’s break down some of the more popular home mortgage loan programs.
30 Year Fixed-Rate Mortgage
This refers to the type of home loan that comes to the mind of most buyers. A conventional fixed-rate mortgage means that your lender will approve a home loan for 80% of the appraised value of the property to be paid off in 30 years, and you come up with the difference of 20%. These mortgages can provide the best interest rates, but they are mostly approved for those with a high credit score. There are conforming loan limits, but you may qualify for a jumbo loan as well (See description below).
15 Year Fixed-Rate Mortgage
This type of home loan works basically the same as a 30 year fixed rate mortgage, only as you can see, the loan is paid off in half the time. Aside from being paid off more quickly, your home will gain more equity since more of your payment will go to the loan’s principal balance. The downside of course, is that you will have a higher mortgage payment.
FHA 30 Year Fixed
This is a loan that is guaranteed by the Federal Housing Administration. With that, buyers can qualify under different guidelines that take into consideration a lower credit score, along with (usually) a lower rate. One of the drawbacks to an FHA loan is that there are limits to the amount you can obtain (Currently $625,500 in Los Angeles County). Also, some condominium complex Homeowner’s Association limit the number of FHA owners in their complexes. Contact us for details on how this works. FHA loan also require only a 3.5% down payment.
Jumbo 30 Year Fixed
Conventional fixed rate mortgages have conforming limits, so when they are exceeded, you will need to qualify for a jumbo loan. In Los Angeles County, the jumbo loan limits are $729,750. Other than that, a jumbo loan works pretty much the same as a conventional fixed rate mortgage.
5/1 yr ARM
Sometimes known as a “hybrid” loan, this loan is very popular for buyers who want to get into a home, but can’t qualify for a conventional mortgage. a 5/1 yr ARM is an adjustable rate mortgage where the loan’s interest rate is fixed for five years, usually at a rate lower than conventional mortgages. After 5 years, the loan reverts to a conventional loan at whatever the current rate will be at that time. Pros to this type of loan: It’s a great way to get into a home when a buyer’s funds are limited. Cons: You won’t know where interest rates will be in five years.
Want to know more about other home loan programs available to you? Contact the Elgin and Pilar Walker Team, and we’ll help find a loan that’s right for you, and get you into the home of your dreams!
Elgin & Pilar Walker
Keller Williams VIP Properties
25124 Springfield Court Suite 100
Valencia CA 91355
Office: (661) 290-3781
Mobile: (661) 347-6248