Loan Options 

Learn about the different home loan types to decide which ones might be right for you.

CONVENTIONAL FIXED-RATE MORTGAGES

This "traditional" type of loan maintains its original interest rate throughout the entire life of the loan. (Any change in monthly loan payments will be due to increases in other charges like insurance or taxes that will naturally occur over time.) Fluctuations in market rates, over the term of your loan, won't have any impact on the amount of interest you pay because that rate is already "fixed."

A Fixed-Rate Mortgage Loan May Be A Good Choice If You:

- Want the security of knowing your interest rate will not change, nor will your monthly payment, unless property tax and insurance amounts change
- Plan to stay in this home for several years
- Don't expect your income to increase significantly in the coming years Fixed-Rate Mortgage Loans come in various terms such as 10, 15, 20 or 30 years. In determining the length of your loan, you may want to consider total amount of interest you want to pay over the course of your loan.

For example, the total cost of a 30-year loan in terms of the interest paid on the loan is higher than the total cost of a 10, 15, or 20-year loan. With a 30-year loan, you have the advantage of lower monthly payments due to the longer loan term. With a 15-year loan, you have the advantage of repaying the loan more quickly with higher monthly loan payments. If you can afford to pay more per month, you reduce the number of months you have to pay. Also, choosing a 15-year term will save you thousands in interest charges vs. the typical 30 year term Another option to decrease the amount of interest you pay is to get a 30-year loan, so you don't lock yourself into higher monthly payments, but pay a little "extra" each month towards the principal when you are able to do so.

ADJUSTABLE RATE

An Adjustable-Rate Mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. Generally, the initial interest rate is lower than that of a comparable fixed-rate mortgage. After that period ends, interest rates — and your monthly payments — can go lower or higher.

An Adjustable-Rate Mortgage may be a good choice if you:

- Want to maximize your buying power
- Want to keep your payments lower during the first few years of your loan
- Plan to move into a different home within the next ten years
- Plan to pay-off your mortgage within the next ten years
- Expect your income to increase significantly in the next few years

GOVERNMENT BACKED LOANS (FHA, USDA, VA)

FHA Loans

Backed by the Federal Housing Administration, FHA loans are mortgage loans that have lower down payment and credit requirements, making them accessible to more people. Depending on where you live, you can get an FHA loan with as little as 3.5% down. The downside of an FHA loan is that you’re required to pay an upfront mortgage insurance premium equal to 1.75% of your total loan value, followed by monthly mortgage insurance payments. Depending on the size of your down payment, you may be paying monthly mortgage insurance for the life of your loan.

USDA Loans

USDA loans are government-backed loans that can help you buy a home in a suburban or rural area. USDA loans don’t require a down payment with a qualifying credit score. The home you want to buy must also be in an eligible rural area; you can check your potential home’s eligibility on the USDA website.

VA Loans

The U.S. Department of Veterans Affairs backs VA loans. VA loans are only for veterans, current military personnel and qualifying surviving spouses. The approval process will require you to have a valid certificate of eligibility (COE) as proof that you qualify for the loan. Like USDA loans, VA loans don’t require any down payment when buying a home. However, both types of loans still require the homebuyer to pay closing costs.

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