Today’s homebuyers have several options when looking for the best home loan. The key to finding the best mortgage is understanding what is best for your particular financial circumstances. When you shop for a new automobile, are you simply looking for the lowest monthly payment, even if the terms are much longer? Or, do you prefer to pay more per month, knowing that you will pay off your vehicle much sooner and save more money by paying less interest? Finding the right mortgage can be very similar.
Understanding the benefits, costs and qualifications for home loan products doesn’t have to be difficult. For most borrowers, finding the best mortgage is determined by answering two questions. How much money do I need for a down payment? And, how much are the monthly payments?
Many different loan programs require little or no down payment. But as with anything today, there are requirements and qualifications.
- VA loans do not require down payments for eligible veterans, but does require a funding fee, which can be financed into the loan. Disabled veterans are exempt from paying a funding fee.
- VHDA first time homebuyer programs offer zero down payment options, but require mortgage insurance (adding to your monthly payment costs). VHDA also includes income restrictions with most of their programs.
- FHA allows for as little as 3.5% down, but includes an upfront mortgage insurance premium of 1.75%, plus, monthly mortgage insurance of .85% for the life of the loan.
- Conventional loans do allow a borrower to put down as little as 5%, with monthly mortgage insurance (which drops off after loan-to-value reaches 78%).
- If you’d prefer a conventional loan, without the added mortgage insurance, you’ll be required to put down the traditional 20%.
- Note: VA and FHA loan rates tend to be slightly less than conventional financing options.
Still not sure. Contact a licensed mortgage professional, and allow them the opportunity to walk you through your home loan options. Each person and circumstance is unique, and an experienced loan officer can guide you in right direction.
Bottom line is that each buyer must consider what is more important to them and their particular financial situation. A buyer needs to weigh whether monthly cash flow (lower monthly payment) is more important than paying off the loan and building equity. Ultimately, that decision can only be answered by you.