Federal Housing Administration (FHA) Loans Federal Housing Administration (FHA) insured loans are made by private lending institutions such as banks, savings & loans, or mortgage companies to eligible borrowers for the purchase of a home. To secure an FHA loan, a borrower must apply and qualify with a certiﬁed FHA Lender.
Additionally, eligible borrowers must be able to pay a minimum of 3.5% of a home’s purchase price. If the loan is approved, FHA will insure a portion of the loan’s value to the lender.
The best type of loan for you will likely be based on the down payment you can aﬀord and the length of time you plan to spend in your home.
If you’re considering a variable rate mortgage, you’ll want to be sure to understand what a rate increase could do to your monthly payment. Be sure to ask when and how your loan payment will vary.
Veterans Administration (VA) Guaranteed Loans
VA Home Loans are available to qualiﬁed veterans and their spouses. Private lending institutions issue the loans which are in turn guaranteed by the Veteran’s Administration. The VA does not require any down payment on VA Guaranteed Loans and allows the borrower to receive a competitive, ﬁxed interest rate.
Know Your Rate – And Your Terms
When you start shopping for a loan, you’ll start looking at interest rates. The interest rates, terms, and fees for a mortgage will be based on your qualiﬁcations as a borrower and on the current lending market. Keep in mind though that ﬁnding the right loan is not just about ﬁnding the lowest interest rate possible. Mortgage institutions oﬀer loans of varying terms – typically 30, 20, or 15 years. Shorter term loans can save you thousands of dollars over the life of your loan if you can aﬀord a higher monthly payment.
You’ll want to get a complete picture and break down of what a given oﬀer means to you on a monthly basis as well as how much money you’ll be spending over the life of the loan.
At a minimum, you should request quotes with a few diﬀerent scenarios from a few lending institutions and compare the ﬁnancial impact of each situation before you determine your best course of action. Shopping around is worth your time!
When you receive quotes – ask your lender whether you’re being quoted the lowest rate for the day or week. Ask what the loan’s Annual Percentage Rate (APR) is. The APR will express as a yearly rate all of the fees associated with a loan.
If you are satisﬁed with a proposed interest rate, you can ask your lender if he or she can lockin the quoted rate. There may be a fee associated with locking in a rate and the agreement will generally only last 60 to 90 days.