Home Mortgage Loan Options for Buyers

When you make the decision to buy a home, one of the first steps to take is applying for a loan. There are many loan options available to homebuyers that give a variety of options when paying for their home. Some groups, such as low-income families and veterans, may have additional loan options to consider. Researching ahead of time can help you prepare and make a better decision on what’s right for you when working with your lender. We have put together some important factors and loan options to consider during your first step towards buying a home. 

How long do you want to make payments on your new home and when would you like to have it paid off?

What would you like your monthly payment range to be?

The answer to these questions can help you decide on what your loan term should look like. A loan term is the length of time in which it is expected for you to pay back your home loan. 

The most common options for this are 30 and 15-year loans, however longer and shorter terms are also available. 

The factors you need to weigh when deciding which loan term fits your plan are monthly payment (principal and interest payment), interest rate, and how much interest is paid during the entirety of your loan term. Typically a longer loan term will result in more interest being paid overtime with a lower house payment, while a shorter loan term offers less interest but higher monthly payments. However, your interest rate will also play a big part in the price of your monthly house payment and interest paid overtime. 

Interest rates are not the same for all lenders, so we recommend that you explore offers for different rates to see what aligns the most with your home financing.

• There are different periods of time in which you can pay back your loan, called Loan Terms
• The term you choose will affect the monthly house payment and interest paid overtime on your home
• It is important to note the interest rate offered by your lender as it will also affect your house payment and total interest paid during the term

You have two options when it comes to deciding on your interest rate, fixed and adjustable. Most homeowners opt to use a fixed interest rate. With fixed interest, you are able to lock in your rate and can expect it to stay the same throughout the entirety of your loan. While the drawback is a higher set rate, it offers a fixed monthly payment. With an adjustable-rate, the home buyer is given a lower fixed rate for a short period of time and then will be given a new rate from the lender based on the current market. Adjustable-rate mortgages are appealing to buyers who don’t expect to live in their home past the fixed rate of their term and/or have a good understanding of the expectations and limitations of an ARM and know they can benefit from this option.

• Home loans have the option of having a fixed interest rate or adjustable interest rate
• Fixed interest rates are the most popular and stay the same during the entire life of the loan
• Adjustable interest rates are sometimes a good option for homebuyers who have a better understanding of home loans and want a lower rate on their payments

When it comes to mortgage loans, you have a lot of options to choose from. Commonly, the different types of loans offered are split into three broad categories. Conventional, FHA, and Special Programs. The loan you choose to use for buying your home will affect the requirements for your downpayment, the cost of your loan, and the amount you can borrow from your lender. Here are the different loan types to consider.

Conventional
Most mortgage loans will fall under this category. A conventional loan is not a part of any government loan program and generally has fewer overall costs associated with them. Borrowers looking in this category should have an average or above-average credit score and debt-to-income ratio. They are the best choice for home buyers that can afford a higher down payment and want a lower interest rate. 

FHA
FHA loans are provided through private lenders and insured and regulated by the Federal Housing Administration (FHA). These loans are typically more attractive to first-time homebuyers since they come with a lower down payment and credit score requirement. The cons associated with these loans are stricter property standards, more requirements from the borrower, and limitations on the amount that can be borrowed. Homebuyers should consider this loan option if they have a low-moderate credit score, and are looking to pay a smaller downpayment.

Special Programs
There are certain loan programs that exist for qualifying groups. These mortgage loans can sometimes offer better rates than conventional or FHA loans but have very strict requirements. You should also check to see if you qualify to weigh all of your options. These loans include:

• VA Loans- Offered to qualified veterans and allow lower interest rates and a $0 down payment
• USDA Loans- Offered to qualified low-income individuals or families looking for housing in suburban or rural areas, allow lower mortgage insurance requirements and a $0 down payment
• State & Local Programs- It’s important to check your local and state programs for mortgage loan options. Contact Bess Blvd to go over available housing loan options offered through Ohio and the local counties.

• There are three loan categories: Conventional, FHA, and Special Programs
• You may qualify for more than one so it is important to get multiple quotes from your lender and find what’s best for you
• Conventional loans offer lower interest and costs associated with buying a home but require better credit, DTI ratio, and a larger down payment
• FHA loans offer lower down payments and allow lower credit but have a lot of requirements and limits for the borrower
• Special Programs exist for qualifying people and include loans with no down payment and low interest
• State and local programs may be offered in your area, be sure to check with your lender or agency to see what is available

If you have any questions or need more information about local loan programs, reach out and ask our team, we are happy to assist! 

Bucyrus
201 W Charles Street
Bucyrus, OH 44820
419.562.1584
BessBlvd@Bess.Realtor

Upper Sandusky
233 S Sandusky Avenue
Upper Sandusky, OH 43351
419.310.1016
BessBlvd@Bess.Realtor